MIRIAM HITS FOREIGN CHAMBERS ON IPPs

Sen. Miriam Defensor Santiago, chair of the Senate energy committee, said that the Joint Foreign Chambers of the Philippines (JFC) oppose amending Epira because they do not want a review of the IPP contracts.

Epira is the Electric Power Industry Reform Act, while IPP is an industry power producer.

“The foreign chambers have a conflict of interest. They want to preserve Epira, but at the same time they do not want a review of the IPP contracts, apparently because they want to protect their economic interests and investment returns,” Santiago said.

Santiago said that under the IPP law, any proposed electric generating facility should prove that it can generate electric energy cheaper than can be generated by Napocor (NPC), by accessing lower cost of capital, cheaper plant investment, and locally manufactured equipment.

She said that according to a study, in all types of power plants, the IPP costs are higher than NPC generation costs.

“Napocor IPP contracts are like the BOT contracts. They are not standard PPAs which take some levels of business risks,” Santiago said.

BOT stands for build-operate-transfer, while PPA stands for purchase power agreement.

“The IPPs make windfall profits at the expense of consumers. The IPP contracts are unconscionable because the IPPs are already paid for capacity, and for operation and maintenance. Yet at the same time they have a take-over-pay level for variable energy conversion fees. The take-or-pay provisions are excessive,” the senator said.

Santiago said that IPPs follow a fee structure of dollars per kilowatt hour, where the standard procedure is based on pesos per kilowatt hour.

Santiago listed the alleged inconsistencies in the JFC letter to Pres. Arroyo, as follows:

• JFC objects to Epira amendment, but does not particularly explain why.
• JFC contradicts itself because it rejects Epira amendment, but at the same time supports earlier open access. To achieve earlier open access, Epira has to be amended.
  
• JPC contradicts itself by calling for transparent and competitive electricity industry market and yet it rejects at the same time a review of IPP contracts. This is also conflict of interest on the part of JFC.
  
• JFC makes a bare statement that amending Epira will negatively impact the power industry market, without specifying the ways in which negative impact would result.

Santiago said that JFC issued the statement on the presumption that by the end of 2008, NPC will complete 70% privatization.

“What is the basis for this presumption? Will JFC members participate in bids for the JPC assets? At present, no foreign companies are involved in bidding for NPC assets. The only active bidders are local investors,” the senator said.

Santiago said virtually the entire Senate rose to criticize the recent JPC letter to Pres. Arroyo opposing Epira amendment, because the letter should have been addressed to the Congress.

“Lawmaking is the sole prerogative of Congress,” Santiago said.

Santiago said that the senators did not like the letter, because it appears to be an attempt by foreigners to meddle in Philippine policy making.

MIRIAM: JAIL FOR LYING ON POWER RATES

Sen.Miriam Defensor Santiago, chair of the Joint Congressional Power Commission (Powercom) said she would cite for contempt any official of Meralco, NPC, or WESM who fails to prove allegations made during the public hearing on power rates.

“In other words, if I catch them lying under oath, those officials could be fined up to P500,000, and jailed up to six years,” she said.

Santiago said that for her to decide who is lying, she has secured the cooperation of UP professors who are experts in the electric power industry, namely: Profs. Allan Nerves, Rowaldo del Mundo, and Bienvenido Malquisto, from the Electrical and Electronics Engineering College; and Profs. Arthur Cayanan, and Helena Agnes Valderrama from the Business Administration College.

Santiago issued “urgent orders to submit information” to Meralco president Jesus Francisco, NPC president Cyril del Callar, Asst. vice-president Mario Pangilinan of PEMC, and OIC Alejandro Barin of the ERC.

The orders specify particular documents required from each agency, to be submitted 15 days from receipt of the order.

“The first order of the day is to determine the price paid to the IPPs of both Meralco and NPC,” she said.

Santiago said the issue with respect to Meralco is alleged price manipulation, by making it appear that their own IPPs sell at cheaper prices than those charged by NPC and WESM.

The senator said the issue with respect to NPC is that NPC has been passing on to customers actual IPP costs, instead of avoided costs, meaning marginal cost, as provided by law.

“What Meralco and NPC pay to their respective IPPs, sets the reference rate for the power rates paid by consumers. We have to put closure on this IPP issue, otherwise our power rates will be high forever,” she said.

Santiago said that if documents prove that Meralco intentionally made the decisions to favor its own IPPs at the expense of consumers, that would be management abuse which could be a ground to cancel the Meralco franchise.

“It is virtually impossible that Meralco managers did not know that their decisions would result in unconscionable transfer of wealth from consumers to their own pockets. Such alleged mismanagement is punishable,” she said.

“The second order of the day is the alleged NPC manipulation which results in the Meralco billing for WATOU, or weighted average time of use. It appears that the TOU rates of NPC are very high,” she said.

Santiago said a separate hearing will be needed on the issue that NPC is allegedly increasing its prices to create an emergency situation which would allow it to buy fuel, not through competitive bidding, but through negotiation.

“The Senate energy committee has a duty to investigate whether NPC is negotiating with fuel supplies, instead of holding competitive biddings. The related allegation is that NPC is dealing with fly-by-night coal suppliers,” the senator said.

-End-

Transcript of Senator Miriam Defensor Santiago ’s interview

After the Powercom hearing on Meralco’s high electricity rates

Ang Joint Congressional Power Commission or Powercom na may kapangyarihan sa power industry ay at least nagbigay ng dalawang resulta na makatulong para bumaba ang presyo ng kuryente. Una, inutusan namin ang Energy Regulation Commission, ang tagabantay ng Meralco, Transco, at NAPOCOR na hindi dapat payagan ng ERC ang petisyon ng Meralco.

May kasunduan sila na dahil may utang ang Meralco sa NPC at ang NPC naman ay may utang sa Meralco, hindi nalang nila itutuloy ang paghahabol ng utang nila sa isa’t isa kung ‘di ipasa nalang nila sa mga customers. Ang ginawa natin ngayon ay inutusan ang ERC na huwag payagan ang petisyon na iyon dahil nag-utangan sila sa negosyo nila. Walang papel ang taong bayan doon, hindi naman tayo kinonsulta sa mga utang na iyon. Kailangan sundin ang prinsipyo na kung hindi nakisali ang consumer sa desisyon ng management, hindi sila dapat singilin.

That’s called the “just and reasonable principle”. Under that principle, we have ordered the ERC to dismiss the petition of Meralco supported by the NPC to pass on the costs of their mutual debts to the consumer. We do not even know the exact amount, but definitely it will run perhaps to billions.

Pangalawa, nakuha natin kanina na utusan ang ERC na lagyan ng limit ang systems losses na kalakip doon sa billing ng Meralco. Bawat buwan, nakalakip doon sa binabayad natin sa kuryente ang tinatawag natin na systems losses. Ngayon sa ilalim ng batas, dapat may limit yan kung magkanong systems loss ang pwedeng ipasa ng Meralco sa customer. Hanggang ngayon, hindi nila linalagyan ng limit, kaya inutusan natin kanina ang ERC na lagyan ng limit ang systems loss na yun para lumiit din ang pagsingil sa ating consumers.

Who is to blame for the high electricity prices?

Hindi mo masasabi dahil ang aming mga conclusion ay manggagaling sa mga dokumento na hiningi naming ibigay sa komisyon galing sa iba’t ibang mga pinuno ng mga ahensya na may kinalaman sa paghatid ng kuryente. Pero sa ngayon nakikita ko na mayroon talagang mali na ginagawa ang Meralco. Halimbawa, inaamin ng presidente ng Meralco kanina na ang binibili nilang mga metro sa kuryente ay naggagaling din sa kumpanya na ari din ng Meralco at inaamin nila yung ibang systems losses nila ay hindi kasalanan ng mga gumagamit kundi hindi basta dahil teknikal o due to pilferage kaya ang Meralco ang may kasalanan.

Hindi lamang iyon, pati ang Napocor ay may kasalanan din. Mayroon din silang management abuses. At dapat, ang tagabantay o regulator nila na ang ERC ay kahati din dun sa pagtaas ng presyo dahil hindi sapat ang bagsik ng ERC na bantayan at suriin nya ng mabuting mabuti itong pinagpapatong sa ating electric bill kaya hindi mo masasabi talga na iisa lang sa kanila ang may kasalanan. Pare-pareho silang may sala talaga at banding huli, mangangailangan yan ng pagamyenda ng ating batas ngayon na tinatawag na EPIRA law.

How soon will we see the results?

I hope the results will reflect, more or less, 30 days after the 15 days compliance I gave the ERC.

How about Mr. Garcia's proposal to change Meralco's management?

Ewan ko lang kung pwedeng magawa iyon dahil napaka kumplikado nito, sari-saring mga scientific factors ang involve jan. Kaya ang gagawin natin ay hihingi tayo ng tulong ng isang grupo ng mga UP professors na sa ngayon ay nag-aaral kung paano ibaba yung presyo ng kuryente.
How about the proposal to bring down the VAT?

Imposible yun, dahil wala na ngang pera ang gubyerno tapos lahat ng buwis na napatong dun ay gusto nilang tanggalin, e di lahat nalang ng sector ng ekonomiya hihingi ng ganyang pagalis ng VAT.

On Garcia’s proposal to divide the franchise ng Meralco

There’s no problem with that, we already have a model. What used to be the MWSS was divided into two and it did not result into higher water rates. It, in fact made a lot of money for one franchise holder although the other franchise holder did not make much money. Anyway, it resulted in better water supply. So, we in the Commission have no objection if that is his proposal. Ang question lang dun, ay sabi nila ay hindi nila gusto na ang GSIS ay magpapatakbo kung di sila ang maghahanap ng mas magaling na magpapatakbo. Ewan ko lang kung magagawa yan dahil marami kasing pasikut-sikot jan. Sino ang ilalagay mo dyan ay dapat alam niya lahat ng mga relations diyan ng Meralco at ng mga subsidiary companies and all will depend on the price of electricity by that time. Pero kung management efficiency lang ang paguusapan, mukhang may napatunayan kanina sa pagtatanong ng mga senador at mga kongresista na talagang may management inefficiency. Ibig sabihin ay hindi napaaketo ang batas na sabi ay dapat bigyan ng kuryente ang mamamayan sa least cost manner.

Is there a syndicate here?

Una, ang pag-amin ng Meralco na bumibili siya ng sarili niyang mga metro sa sarili nyang kompanya, at least in part. May mga satellite companies ang Meralco kaya nakikinegosyo sya sa sarili niya. You should keep your private business interest at arm’s length from the public interest.

Is Meralco to blame for  the systems loss?

Partly may kasalanan ang ERC, kasi dati may limitasyon yan e, I think it was 9.5 percent tapos na-abolish ang limit na yun and the power was given to the ERC to set the new limits depending on all those factors that I read off, pero hanggang ngayon hindi sila nagseset ng limits kaya parang libre ang Meralco na gumawa ng kanilang limits. Sasabihin nila na pareho ang lahat ng ito at pinayagan ito ng ERC kaya yun naman ang base ko na magsabi na lax ang ERC. Sana kung mas mahigpit sila sa pag implement ng EPIRA, hindi sana tumaas ng ganun ang singil sa kuryente. Hindi ibig sabihin na dahil na-approve na ng ERC e legal na. Maaring may kasalanan din ang ERC at pati sya maparusahan.

Theoretical studies by technical scholars can find out if there has been a violation of the “just and reasonable principle” or violation of the least cost principle. They could be charged criminally under the penal code for combination in restraint of trade kung ang resulta ay tumaas ang binabayaran ng mamamayan o kaya hindi maganda ang resulta sa ekonomiya pwede na siyang violation of combination in restraint of trade. Parang anti-trust law and anti-monopoly law.

Transcript of Senator Miriam Defensor Santiago ’s interview

On Congress possibly investigating Meralco’s high power rates

Kailangan na talagang imbestigahan ang Meralco dahil napakataas ng binabayad natin sa kuryente, at mataas naman pala ang kinikita nila. Kukumbidahin ko ang chairman ng House committee on energy na sumama sa Senate energy committee para sabay na lang kaming mag-imbestiga. Nalaman ko na inutusan ni Speaker Nograles si Cong. Mikey Arroyo, na chair ng House committee on energy na imbestigahan ang maaring pagbabago sa pag-aari ng Meralco para matupad ang pagbababa ng bayad sa kuryente. Kung gayon Kinukumbida ko ang House committee on energy na sabay na lang kami ng imbestigasyon ngayong linggong ito, kung maaari sa Biyernes, para iisa na lang at hindi paulit-ulit.

Ang pinakamalaking tanong ditto ay bakit sa buong Asya tayo ang bansa na may pinakamataas na presyo ng kuryente, samantalang naibenta na ang isang bahagi ng Napocor at ibebenta pa ang naiwan.

Ang isa pang tanong ay kung bakit napakabagal ang pagpapa-privatize ng Napocor. Kung totoo ang sinasabi ng Pangulong Arroyo na bababa na ang pagbenta ng kuryente ng Napocor sa Meralco, bakit hindi natin nararamdaman na bumaba ang pagbayad natin sa Meralco. Dahil kung mura ang bili nila ng kuryente sa Napocor, na pag-aari ng gobyerno, dapat mura rin ang signil sa taong-bayan. Nakikita natin na may disconnect sa prosesong ito. At bakit kung nanakaw ang kuryente, iyong tinatawag na systems losses, bakit tayo ang magbabayad nito? Hindi naman natin ito napakinabangan. Dalawang beses nang sinabi ng Korte Suprema na masyadong mataas ang pagsingil ng kuryente ang Meralco. Inutsan pa itong ibalik ang Meralco na ibalik sa consumers ang binayad natin. Kung gayon, mayroong may kasalanan diyan Bakit walang imebstigasyon kung bakit mataas ang singil sa kuryente at kung sino ang may pananagutan doon? Lahat ito ay dapat masagot sa joint hearing ng committees of energy ng House at Senate.

There is no congruence in the explanation of the government that it has already lowered the sale price by Napocor to Meralco, and yet Meralco has not lowered its own selling price to the retail consumer. Why is there a disharmony between the process of generating power and bringing it to the consumer? That is the function of the JCPC under the Epira, to see to it that the electricity rates are set as low as possible. Apparently we have not achieved it. Meralco now is the focus of attention and what is stopping the power industry from lowering electric rates so that we can be competitive in the region.

What will be the objectives of the hearings?

If we want to insert more provisions in the Epira law, which is already under debate on the Senate floor. We are still in the process of seeing what kinds of amendments to the Epira will be made. And if we hold these hearings, the conclusion will take the form of possible amendments to the Epira law.

On the possibility of the baselines bills to be reassigned to another committee

Ang ating mungkahi diyan ay tapusin muna ang pag-aaral ng isang grupo ng mga eksperto, na tatawagin nating Congressional Commission on National Territory , at saka tayo gumawa ng public hearing at possible plernary debates tungkol sa bagay na iyon.

Kailangan ko talagang aksyunan ang baselines bills. Ang sinabi ko lang ay hindi ako papayag na madaliin iyon dahil ito ay napakalalim na paksa. Hindi maari na sukat pinag-usapan mo o inisip mo ay gagalaw ito dahil nakasalalay rin dito ang ibang bansa. Kaya dapat diyan ay pag-aralan nating mabuti.

This is really an international problem because it concerns the concept of the extended continental shelf. We need to understand this profoundly. We cannot act on the spur of the moment.

Since it involves a lot of issues, can the bills be tackled by the Committee of the Whole?

Iyan ang siguradong paraan na babagal ang discussion diyan. Una, dahil ang paksa na ito ay para sa mga dalubhasa, which requires highly expert opinions because we shall be debating in an international forum with experts from every country in the world. So we better be sure of our scientific, technical, and legal data. So in that case, we need to conduct it by committee, not by a committee of the whole.