On last week’s cover story ‘Nationalize Power Industry’ (Vol. 4 No. 40/ June 2-8, 2014)

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Allan Reyes: Nationalization=Crony Capitalism.

Arnel Endrinal: Sometimes funny about people who want nationalization of industries… They are the same people who say government is very corrupt and inefficient yet often they want government to run everything.

Anders Juhl Jensen: Allan Reyes, nationalization is bad, but it is not crony capitalism. How can it be? The debate is destroyed, when we use terms wrongly. It renders the term crony capitalism meaningless, if used to cover every thing we don’t like. If we are to fight crony capitalism, we need to understand precisely what is crony capitalism. The first step is to differentiate it from other phenomena. The power industry is a complex issue. A state run power sector has problems with resource utilization etc., privatization has big problems with corruption and crony capitalism, nationalization of private power companies has sinister problems concerning property rights and concealed political power struggle etc, unregulated private power sector will have huge problems with monopoly and collusion. There is no perfect way to organize the power sector. No simple answers or solutions.

Trevor Bailey: There is a solution, and it is a mix, some parts are managed by the government and others are privately owned and operated. It is again just a matter of thinking outside the box. For example the infrastructure which carries the power from source to the delivery points is a government managed network, but the supply to the consumers is not, it can be competitive. The various sources can be privately owned as well or PPP. The idea is the suppliers buy load capacity on the network, the company’s selling to the end user buy load from the suppliers, and pay a fee to the government for using their network to deliver it. You could have numerous companies in the retail market competing for the consumer dollar, the suppliers are competing to get the retailers to buy from them, all the government does is provide the “highway” to deliver it. It is then a matter of who owns the meter box at each house, change retailer, you get your meter changed.

Steven Egay: I think one solution is that government should maintain control of the NGCP (not 100% just controlling share). So that government have more leeway in power distribution instead of being controlled by some private concerns. And at the same time open up investments in power generation to as many players as possible. This way the supply availability and costs are addressed. This will work if the power distribution sector does not influence the power generation companies which is a big possibility if NGCP is privately controlled.

Trevor Bailey: Yes I visualize it like agriculture. A farmer grows his crop, he uses a government owned road to drive his truck to the wholesale market, once there he sells it to whoever retailer gives him the best price. The same works with water and telcos, it levels the playing field and generally keeps a lid on costs.

Anders Juhl Jensen: Trevor Bailey, in North Europe we have the Nord pool spot market. It works pretty good. Power producers will bid in according to their marginal cost, (except wind power that will just flood the market whenever the wind blows). The only problem is that you cannot get people to invest in new capital intensive power plants such as nuclear or wind farms, unless you get a subsidy, which will basically pay the capital cost (http://www.nordpoolspot.com)

Trevor Bailey: You do not say what the infrastructural mix is, in the places I am familiar with the producers are a mix of private, PPP and government. Demand drives construction. Often the government is the one who builds, but once established will sell off into PPP with the private company providing the management and maintenance and the government the asset, the Private part does not perform, the government finds a new manager.

Trevor Bailey: It is kind of funny, everyone wants the cash flow, but no one wants to invest the capital.

Anders Juhl Jensen: If government builds and then sells, you will have the problem with corruption and rigged bids.

Trevor Bailey: In the cases I am familiar with they register a State owned Corporation, then sell shares. Almost using a co-operative concept, preference is given to the individual, and what is not sold on the open market is then offered into the corporate market. They seldom let more than 49 percent go however.

(Courtesy of Get Real Philippines Community Facebook Page)

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