Little boys lost in the (political) wilderness

They are hotshot dollar millionaires. These former investment bankers earned their spurs in Wall Street and Ivy League business schools. But back home in Manila, they are like little boys lost in our kind of political wilderness. We all know what happened to the Peace Bonds. Now, it seems, it is Energy Secretary Vince Perez who is falling all over himself trying to be a political macho.

It all started when Vince decided to emerge from anonymity in a Cabinet with another Perez who is a high profile Made in the Philippines kind of political pro. His heart is crushed every time Ate Glo picks up the phone thinking the Secretary Perez on the line was Nani rather than Vince.

What better way to make himself known than to ride on a popular cause and establish himself as Good News Vince. He launched his campaign with the natural gas drilling at Tarlac. He billed it as a successful find that will change the face of Central Luzon. I remember cautioning him when he told me about this. PNOC drilled a well in Victoria when I was working there, and found little gas and a lot of water. We were desperate to make that well productive if only because our boss then, Ronnie Velasco, came from Victoria. But it was not meant to be.

Good News Vince insisted that this time, they have hit the big time. I gave him the benefit of the doubt. He gave the good news to Ate Glo who was of course, very happy about it. Expectations of people in Central Luzon were raised and the Victoria townsfolk couldn’t stop dreaming what they would do with all the money that will soon come their way.

Then it happened. A confirmatory well delivered more water than gas. They quietly released a story that they plugged and abandoned the hole, much like what we did in the early 80s. Last time I talked to Vince, he still insisted Victoria was a success but he was less certain when all that success could be measured in pesos and centavos.

Sometime last week, Good News Vince came out with a statement announcing that there will be no more gasoline price increases this month. Duh! What Vince did not realize with his announcement is that he reinforced the popular impression that government had something to do with the timing and magnitude of oil price increases. In other words, government is in cahoots with the oil cartel and all the baloney about free market forces in a deregulated environment is precisely just that.

But the biggest failure of Good News Vince in recent weeks is his handling of the PPA controversy. Vince, more than any one else in the Cabinet, should have been the voice of truth and moderation because he knows how complex the issues are. As an investment banker, he must also know the impact of all the uncertainty on the ability of the energy sector to function as normally as possible. But he chose the path of political expedience and sacrificed truth. In the process, he may have placed the financial standing of the power sector in jeopardy.

Okay, I started my career at ABS-CBN and am doing work for the Lopez Group and that should make my views on the issue biased. I will risk having my motives questioned if only to get the chance to set a few things straight in the muddled discussions of the power rate issue.

First of all, the so-called independent study recycled by an unidentified source (a former Napocor president, said a source close to Vince) to another daily alleging overcharging by Meralco sounds suspiciously similar to a presentation made some weeks ago by Secretary Vince. This same study was privately disowned by Vince to a mutual friend as haphazard. If Vince presented that study at Lazard Freres, he would be thrown out in disgrace. It looked more like the work of a bunch of college interns with an ideological axe to grind. It is difficult for me to understand how Vince could say Meralco sought a rate increase of over a peso when he knew all along that Meralco only asked for 30 centavos. His study should have shown that the unbundled petition of over a peso was a theoretical exercise. Meralco filed it at the request of the regulators, based on parameters the regulators set. It was a "what if" exercise.

It was unfair for Vince to also accuse Meralco of including the theater, the hospital and the firing range in the list of revalued assets when he knows Meralco had agreed to abide by the ruling of the old ERB on these issues back in 1998. It worries me that this kind of wrong information must have been given to the President because she was alluding to it in one of her interviews early this week.

In any case, even if those assets were in the rate base, the impact on the final rate would be so insignificant compared to the cost of Napocor incompetence which are buried in the PPA charges. Remember Pagbilao! Besides, it can be argued that the employee hospital is a legitimate employee welfare cost. Among others, the small hospital has an equipped burn center, a must for Meralco whose linemen are exposed to burn injuries all the time.

Because Good News Vince contributed to the muddling of the issues in the energy pricing debate, investors may have lost their interest not just in Meralco but in the local equity market. At least one large fund manager has sent word that the funds they have reserved for acquiring Meralco shares are no longer available.

It is fair to suspect that there are others just as disillusioned with the treatment this blue chip got from no less than the energy chief. That diminishes the ability of government to sell its Meralco shares and raise funds to cover an ever widening budget deficit. I can’t understand the hysteria. If the target is the Lopez family, all the fuss are way off the mark. In a good year when Meralco is able to pay dividends, Meralco just contributes about 10 percent of the Lopez Group’s income.

It is even wrong to describe Meralco as Lopez owned (as almost every news report puts it) because First Holdings just owns about 16 percent of Meralco, which is further diluted because Benpres only owns 47 percent share of First Holdings. In Benpres itself, the Lopezes only own 55 percent, which really dilutes the final Meralco contribution to the Lopez family kitty.

While I don’t think the Lopezes still yearn for the pre-Martial law days when Meralco was responsible for the generation, transmission and distribution of electricity in its area, it is a fact that the price of electricity then was the second lowest in the region and service as we can recall, was efficient. It was precisely during martial law, when government took over, that a tradition of inefficiency and high power rates was started. And some people want government to take over as if the financial calamity known as Napocor never happened.

There is no doubt that the PPA arising from the excessive contracts of the FVR era is onerous and some remedy must be devised. But in so doing, we must not create bigger problems for the country. Because he has the power of his Cabinet position, anything Vince says could encourage or scare away the very people we need to get our power industry in order. It may not be obvious to the man-on-the-street but this ex-investment banker may have soured this country’s investment climate as badly as an Abu Sayyaf kidnapping.

It is always sad when a reputable technocrat sacrifices intellectual honesty at the altar of political convenience. But don’t get me wrong. I think Vince is still one of the good guys. I just can’t figure out what is happening to him. Mid-life crisis, perhaps?

Anyway Vince, Happy birthday na lang! May the years give you more wisdom or at least, a stronger backbone.

Words of wisdom

Reader Fe dela Cruz sent in these words of wisdom: "When you look in the mirror and see white hair, wrinkles and unwanted bulges, look at the bright side and be thankful that your eyesight is okay."

(Boo Chanco’s e-mail address is [email protected]).