Bogus Champion

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Bogus Champion

By Miguel Raymundo

SENATOR Sergio Osmeña III is on his 15th year as senator of this country.

He made it to the Senate by making a big splash of his escape from the cruelty of the Marcos dictatorial years to gain public trust and win a Senate seat in 1995. He sold himself to the electorate as public protector against the abuses of government and big business.

In the Senate he has held the chairmanship of the Energy Committee for the longest time. This is his preferred committee.  And nobody has dared to ask him why he has this predilection toward this Senate body.

In his 15 years in the Upper Chamber of Congress, he has succeeded to project the image of a champion of electricity consumers’ interests.   And until now, many believe that Sen. Osmeña is the consumers’ champion in the Senate against abuses by energy generators and distributors in this country.

Lies and Trickery

This week, however, we saw that all of this was a big lie.  This is one lie and trick of magic that has survived for too long because our Senate and country is enamored with political issues rather than economic interests.

Masking the lie has worked not because of a miracle from heaven, but by the miracle of money that controls mass media.  But numbers belie this public image of this senator from Cebu, that image of consumers’ champion carved  by a media mostly controlled by owners of power generators and distributors.

Those in the energy business own and control  the ABS-CBN and TV5 television networks.  Their presence in the print media is also the envy of other industries:  Manny V. Pangilinan who gives face to the abuses in this sector has control over Philippine Star, Business World, etc., and hold a sizable of ownership of Philippine Daily Inquirer.

These energy players also got ahead of others in the social media, owning Rappler and InterAksyon aside from funding other supposedly independent groups.

That Senator Osmeña is a bogus consumers’ champion is better understood by this question: If Osmeña is indeed our champion against abuses and corruption in the energy sector, why is the cost of electricity in this country almost the highest in the world?

Corruption

The reason our power cost is highest in the world can be traced to corruption in the highest order.  The high cost of electricity is sum total of several costs in bringing power to our homes. These several costs include recovery of investment, capital expenditures, and cost of power bought from generation companies.

Collecting from customers is the job of the distribution company.  Here in the Philippines, it is Meralco that controls over seventy percent of power distributed in the country.

Since distribution companies, in this case, the Manila Electric Company (Meralco), cannot fix their rates without passing through the scrutiny of government regulators like the Energy Regulatory Commission (ERC)—electricity being a regulated commodity—it goes without saying that electricity rates were sanctioned or allowed by this regulator.

But the mandate of the ERC was set by law; and the law is passed by our legislators.  In this instance, the law on energy called the Electricity Power Reform Act (EPIRA) was initiated by Congressional committee, specifically the Committees on Energy of both the Lower and Upper Chambers.

EPIRA was intended to rationalize this sector with the intent of providing the best price of power favorable to the consumers. In time, and mostly, lately, EPIRA has been seen as a mechanism to enrich the investors in this sector to the destruction of the national economy.

Osmeña’s Playground

The passing of the EPIRA in the Senate was marshaled by the energy committee, Osmeña’s favorite playground. So Osmeña pushed a law that was secretly intended to make the poor Filipino poorer and the Lopezes, Aboitizes and the others who own the money that MVP is using much, much richer.

So to claim to champion the interest of the poor Filipino in the Senate is the biggest lie in the case of Osmeña.

Why has he not investigated the biggest rob of the century?

The robbery was done by a handful of families who are billionaires and the victims are the tens of millions who use electricity to light homes.

We bring to the attention of Sen. Osmeña  a final report on the valuation of Meralco assets in 2006 by the PB Associates and the Asian Appraisal Company Inc. both retained by the ERC to conduct and prepare an appraisal of the fixed assets of Meralco. This report contained many glaring overvaluations of these assets.

Comparing the depreciated historical cost (cost at acquisition) and the optimized depreciated replacement cost in this report, it shows that for land and land rights alone, the depreciated historical cost was listed as PhP623,380,096 while the replacement cost was PhP6,593,098,996—reflecting a difference of almost PhP6 billion.

In the same report, depreciated historical cost of for power transformers of PhP58.09 million went up to P5.3 billion, an overvaluation of PhP5.2 billion.

These are two of the list of accounts revaluated after EPIRA. If the other accounts are considered, the total overvaluation amounts to a whopping PhP47 billion, which according to law is recoverable through electricity rates to be paid by the consumers.

These PhP47 -billion overvaluation is just the base figure, because interest is added to recovery costs over time.

Overpricing

Senator Osmeña should know these figures. If not, he should refer to ERC’s copy of the final report on Manila Electric Company valuation dated 30 June 2006 entitled “Asset Valuation for Privately Owned Distribution Utilities Subject to Performance Based Regulation” conducted by Parsons Brinckerhorff Associates and Asian Appraisal Company Inc.

But experts explain that revaluation of eligible assets must not be allowed to be part of the rate base because market value is not the actual costs incurred in providing capital investment utilized in the provision of the public service of transporting and distributing electricity.

This is contrary to EPIRA which provides for reflecting the true cost of doing a service. This will lighten up regulatory pressure and will allow Electric Cooperatives and Distribution Utilities to achieve the economies of scale, improve its efficiencies and reliability of service, and reduce costs.

Hundreds of billions of pesos had already been stolen from the consumers by overpricing of equipment and cost of power generation and distribution from the time of the Lopezes. Going back to the report of PB Associates and Asian Appraisal Company Inc. the cost of power transformers jumped from PhP58,096,582 in depreciated historical cost to PhP5,309,652,432 in optimized depreciated replacement cost or a percentage increase of more than 9000%. This again is charged to the consumers.

The theft has worsened when the foreign owners took control of Meralco. Didn’t Sen. Osmeña notice this?

In spite of continued investigation-in-aid of legislation conducted in the Senate by the Committee on Energy which Osmeña chairs, no law has been passed to rectify the flaws in the EPIRA even if these flaws are very bad to consumers.

Osmeña and the industry players have gotten away with lies and corruption. Owners of power plants and distributors never had it so good until lately that more and more are angrier and angrier over the cost of electricity.

It used to be that people did not understand why in a poor country, electricity cost is too high. It used to be that people were not asking because the issues were too complicated and too many fine prints.

Changing Times

Times are changing the apathy of the people. The clamor to renationalize the power sector is rising enough to create fear on the energy ERC that recently ordered a stop to the PhP4.50 increase in cost of electricity in the period of Malampaya maintenance.

But Osmeña continues to believe his own lies and fantasize his lies are still working. He goes ballistic over the ERC decision to stop Meralco’s new rate and accuse PNoy of mismanagement while warning of economic meltdown from lack of investors.

We wish to remind Sen. Osmeña that investors skip the country not because PNoy is not a good manager but because cost of electricity is too high for them to make good margins.

His tantrum last week shows who he is really protecting. But surely it is not the consumers of power in this country. To accuse him a bogus consumers’ champion is still understatement especially when these energy players have stolen billions of pesos from consumers.

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