Asian Century By Herman Tiu Laurel
Goggling the subject “Congressman Dan Fernandez ERC hearings” I found only alternative social media news sites like Maharlika TV, FB videos, the photo journals site of http://www.congress.gov.ph site of the House of Representative and our own GTNR sites reporting on the mid-August hearings of the good solon’s exposing the 22-years of inaction of the Energy Regulatory Commission dereliction of duty in setting the Weighted Average Cost of Capital.
The WACC forms a basis for setting power rates.
We have been waiting for such a legislative champion for the past 3-decades. “Cong Dan” of Sta. Rosa, Laguna, has been a startling revelation and fills the shoes of a rare genuine public servant of our times.
Among the thousands of legislators, senators and congressmen, that have passed through the legislature from 2001 to 2022, only Fernandez has dared to raise the central economic issues of the Philippines – the causes of the highest power cost in Asia that kills off the nation’s industries, its investment climate and punishes Filipino consumers.
In mid-August this year in a hearing on the ERC (Energy Regulatory Commission) Cong Dan asked the new ERC chair Mona Lisa Dimalanta (former Aboitiz legal counsel) why the ERC with its over 190 technical staff and a number of expensive foreign and local consultant could not help the ERC define the WACC for Philippine power utilities on which final rates would be based.
What the ERC continues to do is set only a Provisional Rate Increases which has resulted in enormous overprice.
The Electric Power Industry Reform Act mandates four-year regulatory periods on which a reset, review and true-up between over-collection by power producers and under-payments by consumers or what in simple accounting is known as “reconciliation of accounts”, are to be conducted.
Five regulatory periods have passed and not a single reconciliation has been implemented by the ERC.
EPIRA, WACC and PBR
The WACC is part of the complicated system of the EPIRA that I and a few other comrades-in-arms in the fight against electricity privation and exploitation of the power oligarchs empowered by Gloria Macapagal-Arroyo’s (GMA) fast-tracking of the EPIRA in exchange for sitting in power after the 2001 power grab against elected President Joseph E. Estrada ousted by a conspiracy of the oligarchy (Ayala, Aboitiz et al), the Americans, the Catholic Church, the Left and GMA.
WACC is a key regulatory concept in the EPIRA that “… represents a firm’s average after-tax cost of capital from all sources, including common stock, preferred stock, bonds, and other forms of debt. WACC is the average rate that a company expects to pay to finance its assets.”
Such assets in the production and distribution of electricity, are used and inputted by power generation and distribution companies like Meralco, as basis to petition for rates and rate increases.
The basis for determining the power charges and legal rate of return for the power companies is the Performance Based Rate (PBR) price of electricity that allow over 18% profit, this system replaced the old RORB (Return on Rate Based) which under the Public Services Act (1936 and amended through the decades) only allowed a maximum of 12% returns for power companies – which was already criminally exorbitant for a captive market, consumer-financed and capitalized industry and business.
The late Jojo Borja used to say that in the early decades of the 50s and 60s their power company would earn only 1% or 2% and they would already be very happy. With the PBR and the literal waver of the WACC using cost of electricity poles and power transformer overpriced by up 500% to 1,000%, Meralco and power companies are making a murderous killing.
Fernandez: a double WACC whammy
Paradoxically, Borja, director of Iligan Light and Power Company had become a fervent campaigner against the EPIRA, in a very real sense turned “traitor” to his oppressive class.
Fernandez is a welcome newcomer to the crusade against the power abuses of the power oligarchy which has the all the other past and present Philippine politicians since Cory Aquino in its pockets.
Actually, what Cong Dan is exposing now we, along with Jojo Borja, Butch Junia, RJ Javellana, Butch Valdez, Ado Paglinawan and a few others have been raises since 2001 when the EPIRA was first passed. The oligarchs control the media with their vast wealth and suppressed our crusade.
One of the main points raised by the congressman in the recent hearings is why Bloomberg business news arrived at 8% WACC allowable WACC rate while the ERC and its consultants are using over 16% which doubles the margin for profit of the power utilities companies. These are just some of many indications of the power oligarchy’s control and manipulation of the ERC, its technical staff and highly paid ERC consultants.
We are happy Cong. Fernandez uncovered these issues and wait for answers he can dig up, but a question lingers in my mind: How long will he keep it up?
There have been many cases of crusaders on these power issues are eventually subdued by the power oligarchy using various means, including money, legal threats and political suppression.
One example of this is Juan Ponce Enrile who joined us in our petition in court against EPIRA but soon after saw him beside the Lopezes endorsing his biography.
PHL rates double those of Vietnam, China
Philippine electricity rates fluctuate upwards of P 10/kWh compared to China’s around P 4.90/kWh and Vietnam’s around P 5.60/kWh. I have been pointing this out for the past two decades without let up, in my articles, my radio and TV shows, in my social media publications and broadcasts.
In one of my broadcasts, I highlighted Manila Times columnist Marlen Ronquillo’s article “Why not us? Where have we failed?” why investments have been pouring into Vietnam and not the Philippines.
The current average price of electricity in Vietnam is VND1,533-2,580 (6.3 to 10.75 cents) per kWh (Yahoo Finance September 14, 2022), taking the highest cost and multiplying by a factor of 0.000043 comes up to US $ 0.108 and multiplied by peso exchange rate at P 58.00 comes up to P 5.80/kWh while current Meralco rate is P 9.9365/kWh for September for those consuming 200kWh or less per month. China’s industrial power rates (higher than household) cost US $ 0.09 or P 5.22/kWh.
The reality of the power costs in the Philippines really exposes the sham of the so-called promise of the neo-liberal clique of Ben Diokno et al that they can make the Philippines a “Mecca” for foreign direct investments. They have never succeeded since Cory Aquino came into power with them and cancelled the Bataan Nuclear Power Plant causing the power deficit that justified their privatization of the entire industry thereafter forcing power intensive companies like Intel and many others to leave the country.