Category: electricity

Bigas, Koryente, Gasolina — pamahal nang pamahal

Good to know that we are not imagining it, that government’s inflation figure — 3.8% in April — hardly reflects the inflation that the common tao struggles with on a daily basis in terms of the increase in prices, year on year, of daily essentials rice, electricity, and gasoline,

‘IN-OUR-FACE’ INFLATION
By Orlando Roncesvalles
Letter from Dumaguete

Rice, electricity, and gasoline

Electricity bills can shock, like the live wires in the 220-volt outlets. Doomsayers will have a field day, and cynics will peddle conspiracy theories even as we experience de rigeur brownouts. We need a superhero to deal with a blooming power crisis. Hmmm. We need a cha-cha fix.

The Dumaguete MetroPost reports that Noreco I and II bills show residential electricity has reached P14 to P16 per kilowatt hour, up by P0.87 and P1.40 from the previous month. The news raises questions about affordability and whether alternative sources such as residential solar energy or ‘mini’ nuclear reactors are viable solutions. The latest editorial in the paper advocates energy conservation measures. It left out going to a porch or veranda with a nice cold cocktail. The better to forget.

The bill shock is a ‘perfect storm’ brewed from seasonal demand and a higher supply price. These two phenomena reinforce each other, leading to a ‘double whammy.’ A third whammy is on the way. Why? Because bad luck comes in threes. Surely, I jest. Keep your fingers crossed on two.

A national official blames “the pass-through cost from the power suppliers.” The pass-through cost shows up as ‘generation cost’ in our electricity bills. This raises a more challenging question: Why are generation costs higher? Noreco II explains that these costs follow a seasonal pattern, rising in the summer and falling later in the year.

But there is no denying that electricity prices have risen. For decades, the story behind electricity prices has remained complicated. Is there too little supply? Yes. Do the power producers compete to lower the price? A few players dominate the market. Is there a problem of red tape that inhibits the entry of more players? Yes. Has government regulation over distribution utilities cut the costs charged to the consumer? We’re still determining. Is the exchange rate a factor? Only sometimes, because the peso fluctuates. Are prices sensitive to imported inputs? Yes.

The inflation issue isn’t just related to finances. It is also psychological. We are creatures of habit. The P500 bill was yellow and comfortable. The polymerized blue P1,000 bill has now become more commonplace. The value of daily transactions has risen faster than monthly incomes. We wish we were like the Argentines who bravely lived with inflation. Or like Henry Higgins getting accustomed to Eliza Doolittle’s face in My Fair Lady. Some search for an antidote in the crypto rabbit hole. The economists say it’s just another tax we cannot evade. Pay it and forget it.

While the educated elite may find an uneasy peace with the official inflation rate (see below), the common tao struggles. He can feel the prices of rice, electricity, and gasoline. These three commodities — called necessities — figure prominently in his limited budget. A measure of inflation focused on these goods is one that we can label as ‘anecdotal’ or ‘memorable.’ The number we get will stick to our brain cells even if the official inflation number does not.

The year-on-year price increase for rice was 21% in May. Local well-milled rice sold for P51.42/kg, compared with P42.50/kg a year ago. For electricity, the local utility (Noreco II) set the residential power rate at P14/kWh, compared with P12.79 in May 2023. This gives an electricity inflation rate of about 9.5%. Gasoline in the Philippines sold for P64.40/liter in May versus P59 a year ago. The gas inflation rate is about 9%. A simple average of these inflation rates is 13%. This memorable inflation rate is unbearably high. (Interestingly, the official inflation rate is much lower at 3.8% in April.)

But what accounts for the disconnect between the low official inflation rate and the high one for the ‘survival’ commodities? One possibility is that the prices of other consumer goods have not risen much or may even have declined. Someone from the Philippine Statistics Authority can explain. A further explanation is that the prices of these three goods are very volatile.

Does the disconnect even matter? Yes, for government officials who have to decide on mandated wage levels. The same goes for political leaders with a support base in the C-E classes. These voters suffer the most with memorable inflation. Economic managers also have to pay attention to the disconnect. They may become complacent with the low official inflation and urge the Bangko Sentral to cut interest rates prematurely.

The disconnect and both types of inflation will inevitably disappear. This is because economists assume or expect the relative prices between various goods to stabilize in the long run. The question of how long before both inflations converge is nonetheless uncharted territory. The answer will depend on how persistent the short-run factors, such as ‘shocks’ and ‘policy mistakes,’ are.

Can we forecast the inflation rate for the three goods in the next few months?

According to economists at the World Bank, the global rice market has been tightening. This is due to a ‘Niño’ effect and to export restrictions by the major rice-producing countries. Unless the government decides to subsidize the retail price or reduce the import duty on rice, we are in for a rough ride. Proposals to allow more rice imports will do little to reduce the local price. But at least there would be supply. So, no long lines to buy rice.

The world oil market and the peso-dollar exchange rate drive gasoline inflation. Even if the world price were to stabilize, the peso has lately been falling. For thinking purposes, we assume that the exchange rate stays where it is. The so-called ‘base effects’ will give us the near-term inflation rate in this scenario. Base effects mean that the inflation rate is calculated using current prices (P64/liter) compared with the average June through August 2023 price of P63.8/liter. This means that we can project a zero inflation rate for gasoline. Good news!

Electricity is more of a mystery. Taxes and subsidies can shift the balance between demand and supply. So can rule changes for the major players in the evolving electricity market. The entry of solar energy has ramped up with technological advances and lower prices for solar panels. At the same time, it is still government policy to push for economic growth. The net effect on the price level is possibly a wash, similar to what we might project for gasoline.

Electricity pricing by Noreco II could stabilize at P14/kWh. The base effect suggests an inflation rate of 12% (from an average price of P12.47/kWh for June-August 2023).

An approximate ‘base effect’ inflation projection for the three products in the next three months would be around 8%. This is based on zero inflation for gasoline and 12% for electricity and rice. Such a projection assumes an unchanged peso-dollar exchange rate. I surmise that inflation will remain persistent, like a disease that requires a lifestyle change.

All is never lost. Containing memorable inflation is no pipe dream. We can do our civic duty by changing our bad habits. Rice makes us fat anyway. We can reset the thermostats on our air conditioners and walk or ride bicycles. Our local governments can build nice sidewalks and bike lanes. We can also pray that the peso will strengthen. Civics are good. Honda thought so.

Some suggest that the government should impose price controls or targets. Never mind that such policies require subsidies and new taxes. They can also result in shortages and long lines. Will that be politically correct? Will the voters in next year’s election care? Time will tell. Space doesn’t know.

The Stoics claim that what matters is the line between things we can and cannot control. Aside from a renewal of civic virtues, memorable inflation is beyond our human ken. That is the province of gods, statesmen, and legislators. The official inflation rate is less problematic. It will remain within the 2-4% target range that the Bangko Sentral has set. That promise is easy enough to keep, especially if memorable inflation dissipates.

_______________________________________________________

Author’s email: ORoncesval4@gmail.com; Twitter: @ORoncesvalles

Professionalism and the ERC

By Randy David

So complex and demanding are the functions and responsibilities of the Energy Regulatory Commission (ERC) that the law that created it pegged its members’ compensation at the same level as that of justices of the Supreme Court. Every section of Republic Act No. 9136, known as the Electric Power Industry Reform Act of 2001 (Epira), squarely puts the burden of protecting the interest of consumers and ensuring competitiveness in a deregulated industry on the shoulders of the 5-member commission.

Read on… 

year-end gripes, and a dream

parang not since the impeachment trial of erap 2000-2001 has the holiday break been so politically charged.

the outrageous hike in meralco bills continues to jolt especially because the supreme court’s 60-day TRO came too late for some customers who have already paid their december bills.  energy regulatory commission, sleeping on the job?  or just happy for the power industry that’s raking in such profits?  vested interests maybe?  bakit ngayon lang naisip yang bid price cap sa spot market?  what’s going on?  testing our limits?

and what about energy sec petilla’s resignation kuno for failing to fully restore electricity to yolanda-ravaged provinces…  for a while there ka-excite-excite the prospect of petilla taking up the cudgels for oppressed electricity consumers vs power oligarchs, but that fizzled out soon enough, pa-cute lang pala, knowing full well that the president would not let him go?  nakakainit ng ulo, nakakainis, to find that he’s just another traditional politico with a moist eye on the palace, or first the senate?

and what about the Tarlac Devt Corp, said to be the manager of Hacienda Luisita, bulldozing farmlands (that farmers have been farming for years), claiming that the land belongs to TADECO and not part of the Hacienda luisita area ordered distributed by the supreme court.  ganoon?  if it has long been farmed by the farmers who claim it, and they have papers showing no other claimants since, what claim does TADECO have on the land?  sino bang may-ari niyang TADECO na yan?  hindi ba ang mga cojuango rin na may-ari ng Hacienda Luisita?  whatever, whoever, it’s a case that should be settled in court, according to the agrarian reform law, and not with bulldozing strong-arm tactics.

and what about the binay brouhaha aka dasmagate…  as though the binays, like most politicos since forever, have not always behaved this way, what are they in power for, and all that jazz.  what was unusual was that the security guards said no, and yet not one in media has told us with certitude that it was because they did not recognize the mayor (and why not? hindi sila taga-makati?), or they recognized him but weren’t told the rules re VIPs until after the incident.  it would also help to know if this was the first time the mayor tried to exit through this gate before, or if he had done it countless times and never had a problem.  come on, media, level up naman.  and you might want to check out a rumor that dasma has opted to change security agencies anyway?  i’d love to hear that it’s not true.

and speaking of binay the mayor, what about the hate campaign crackling on social media vs binay the veep, patriarch of an entrenched dynasty, who would (intends to) be prez in 2016.  nakaka-freak out naman talaga the prospect of a binay presidency, with abigail in the lower house and nancy in the senate.  kulang na lang, mga alipores sa judiciary.  yari tayo, ika nga.  from the frying pan into the fire.

unless, of course, tamaan ng nakaliliwanag na kidlat si jejomar binay, ala saul sa damascus, at ma-convert siya back to human rights advocacy, as in the days of marcos (before cory made him officer-in-charge of makati, what a plum prize).  full circle.  abigail, junjun, and nancy would resign out of delicadeza, and in support of their father’s new politics, anti-poverty, anti-corruption, anti-patronage, anti-status quo, pro-environment, for a change.

a pipe dream, yes, but if there’s one who could make it happen, it’s binay, if he only cared enough for this bayang sawi of ours.

php 4.15 power rate hike – outrageous and obscene

and yet the palace’s first reaction was to defend it — not arbitrary, not unreasonable, it is based on the law.  ah, yes, the Electric Power Industry Reform Act of 2001, the infamous EPIRA that the senate of the eleventh congress passed in the last minutes of the gloria arroyo regime, with the promise that privatization of NAPOCOR would bring down the cost of power to the consumer.

yeah right.  according to a bill filed by senator gringo last year re mindanao’s power problems, when EPIRA became law in june 2001, the retail price per kilowatt hour was php 5.32. in march 2011 it was php 9.84. last month, says boo chanco, it was php 11.06.  the php 4.15 hike would make it php 15.21.  check your last meralco bill and weep.

i’m aghast that the palace made that mistake at all, defending that obscene price hike as though we were talking in centavos rather than pesos in today’s foreign exchange, and as though the department of energy were not remiss in its duties to the public.

mabuti at natauhan sila.  konting damage control, better late than never — coloma pleading that private power companies practice corporate social responsibility, voluntarily desist from passing on costs to consumers, esp in the wake of yolanda, and energy sec jericho petilla promising to investigate and to fearlessly call out the unscrupulous ones, if any, no matter how powerful or powerfully connected. (dec 7 teleradyo with henry omaga diaz)

petilla won many many pogi points when he promised to restore electricity to yolanda-ravaged regions by christmas eve, or he would resign.  on twitter he has been praised to high heavens and a rosy 2016 run-for-whatever-position predicted.  hmm, too soon to tell, even if he’s smooth and simpatiko and all that.  i heard him saying that he does not know how much the restoration will cost, but he will do it, whatever the cost, bahala na.  which is truly nakaka-tense for the visayas.

surely petilla knows that the problem,whether in luzon, visayas, or mindanao, is the EPIRA.  here’s what freedom from debt coalition’s leonor briones said in an open letter to the president in april 2012 when mindanao was gripped by brownouts and higher costs.

Mr. President, the highly flawed policy framework of EPIRA or Electric Power Industry Reform Act is the problem behind the Mindanao power supply issue. This law is designed for big business interests, not for public service. Before EPIRA was passed, the former National Power Corporation was responsible for generating electricity as well as developing power transmission lines. But EPIRA in effect removed this fundamental role of the State. What EPIRA did was to pave the way for private investors to come in and chart the course of generating electric power in our country. This law also gave the control and management of a major pillar of the industry – our national power transmission lines to a foreign State corporation – State Grid of China with Henry Sy’s SM Holdings Corporations as its partner.

In short, the matter of developing electric power supply and management has been left at the mercy of the private sector, an oligopoly of a few big, long-entrenched family/corporate interests.

kung talagang magaling si petilla, and his heart is in the right place, he would champion the repeal of the evil EPIRA and come up with an alternative reform program that would put the public interest on equal footing with business interests.  there has to be a way, an ethical way.  maybe a price ceiling, a profit ceiling, for this essential expense?  how naive of me?  meralco made a net profit of 17B in 2012, a third higher than the previous year, and surely it’s doing even better in 2013.  how about meralco shouldering the costs instead, for a change?  pay back, pay forward.

but wait, meralco says it’s not to blame, it’s only a distributor (really? no power plants?).  what’s gone up in the Wholesale Electricity Spot Market, meralco says, is the generation charge of the power plants producing the electricity.  hmm.  but WESM was devised to encourage competition and keep prices down.  so what is going on?  speculation by the big players?  capitalist greed as usual?  who runs WESM?  who owns the power plants making hay while malampaya is away?  mga tao ba ito?  mga pilipino ba ito?  sino-sino ba itong mga ito na ang titindi kumabig, in billions upon bllions of pesos, wringing hard-earned thousands upon thousands from consumers.  sila mismo, along with meralco, and the rest of the power industry that have been enriching themselves at our expense, ang may kaya at nararapat na magbayad niyang 4.15 na yan.  hindi naman puwede, hindi naman tama, na pass-on na lang sila nang pass-on, lahat na lang ay sa atin sinisingil, to protect, nay, enhance, their profits.

now senator serge is saying that the malampaya fund should be used to subsidize the rate hike.  WHAT? that’s like saying the rate hike is okay, we just need to find the money to pay the power oligarchs.  senator serge should explain instead why they voted yes to the EPIRA in the first place.  he was part of the senate of the 11th congress that gave the final seal of approval in june 2001, along with robert barbers, rodolfo biazon, rene cayetano, anna dominique coseteng, franklin drilon, juan flavier, gregorio honasan, robert jaworski, loren legarda, ramon magsaysay jr., blas ople, tessie aquino oreta, sonny osmena, aquilino pimentel, ramon revilla, miriam santiago, vicente sotto iii, and francisco tatad.  oh and let’s not forget former president gma who pushed for the EPIRA, complete with bribery, it is said.  you wonder what was in it for arroyo.  is she or her family a power industry player too?

ironically, given how unpopular he is these days, enrile was the only senator who said no to the EPIRA in 2001.  and in june 2008 – power rates had risen to php 8.3/kwh in april from php 7.43/kwh in dec 2007 – upon his initiative the senate (14th congress 2007-2010) introduced amendments to the EPIRA to address the perceived weaknesses and clarify the ambiguous provisions in the law.

Juan Ponce Enrile: Seven (7) years ago, Congress passed Republic Act No. 9136 or the Electric Power Industry Reform Act (EPIRA) with the end goal of providing affordable and reliable electricity to consumers in the Philippines. To achieve this goal, the law provided for the restructuring and deregulation of the power industry, however, there were not enough safeguards to prevent power industry players from manipulating the rates and the unabated transfer of the burden of what are properly costs of doing business on to the consumers. [bold mine]

It is in this light that I pushed for the amendments of the EPIRA in order to correct the flaws of the law and to set additional safeguards that will allow the end-users of electricity to enjoy an efficient, reliable, and inexpensive electric power system. (Posted on Facebook)

read More Senators join Enrile in pushing for EPIRA amendments … Miriam to foreign traders: Explain pro-EPIRA lobby … Epira amendment bill might not pass – Villar … Senators scold foreign traders at Epira hearing.  yes, there was, is, a foreign lobby to stop amendments to the EPIRA.  obviously the lobby was successful.

here’s calling out the senators of the 14th congress: villar the husband, enrile, estrada the son, kiko pangilinan, migs zubiri, pimentel the father, angara the father, joker arroyo, rodolfo biazon, the cayetano kids, miriam santiago, chiz escudero, dick gordon, gringo honasan, ping lacson, lito lapid, loren legarda, jamby madrigal, revilla the son, mar roxas, sonny trillanes, and last but certainly not the least, benigno aquino the son, now the president.  you all owe us an explanation for buckling to foreign pressure.  and you all owe us big time for abandoning us to the mercies of a merciless oligarchy.

it’s not as if life is good, the living easy, for the low- and middle-income masses of luzon that depend on meralco for electricity.  if anything, living conditions have gone from bad to worse, with wages remaining low while prices of essential commodities are forever spiralling.  except for the rich and relatively rich, life is harsh, the living a struggle to make ends meet for millions, esp the ones with families, children, to feed, clothe, shelter, and send to school.

life is harsh, the living a struggle, and electricity is the one essential commodity that makes life, the daily grind, bearable.  imagine what life would be like for the masses without electricity.  walang ilaw, walang electric fan, radyo, tv, walang pang-charge ng celfone, (and for the middle class) walang fridge, computer, internet, oven, toaster, plancha, washing machine.  ang dilim.  ang lungkot.  ang bigat.

we won’t die without electricity the way we would die without food and water, but it would be a kind of death, it would be the pits, and many already beg, steal, or borrow, ‘wag lang maputulan ng koryente.  no wonder at all that the news of a php 4.15 (!) price hike, no matter if temporary (malaking IF), no matter if utay-utay ang singil, is driving the masses to tearful, and fearful, desperation.  paano na.  tipid na tipid na nga.  wala nang ihihigpit ang sinturon.

unless the president and the lawmakers get their act together on the EPIRA and bring down the power rate to truly reasonable levels, millions of poor pinoys in the very near future would have to do with even less food and less utilities, maybe no radio, no tv – no entertainment, no escape! – just to keep up payments for a little light, shore up what little dignity they have left, as they struggle, kahig-tuka, to keep body and soul together.

beware the social volcano.
http://getrealphilippines.com/legacy/agr-disagr/8-2-volcano.html
http://business.inquirer.net/8377/philippines-leads-in-income-inequality-in-asean-says-study
http://www.tribune.net.ph/nation/most-pinoys-have-trouble-buying-basic-needs-ibon

 *

10 years of EPIRA: what went wrong?
The curious case of NAPOCOR debts
Power lords
ADB : Anti-Development Bank