Nat'l Grid flaws cost consumers

It is good to know that the new energy secretary is not a pushover. He has denounced the new private sector owners of the National Grid for being less than transparent about the state of the Grid during the days following Basyang.

Energy Secretary Rene Almendras also called upon the Energy Regulatory Board (ERB) to carefully screen any applications from the National Grid for rate increase or recovery of expenses due to typhoon damage. The secretary wants the ERB to make sure the company is living up to the kind of performance required by the so called Performance Based Rate (PBR) scheme.

The rate charged by the Grid, like Meralco, is based on PBR. This means, the more efficient the utility is, the more it is rewarded by a higher rate. But that’s just the theory. Worse, there is no penalty every time the Grid messes up due to their incompetence or reluctance to invest on an honest to goodness rehabilitation of the system. Instead, it is the consumer who is out of pocket.

The energy secretary’s concern about the quality of the National Grid’s service is well placed. Not too many people realize the inadequacies of the National Grid’s facilities end up penalizing the consumer with higher rates. For example, there is this matter of congestion in the transmission lines caused by facilities that breakdown often or that simply has inadequate capacity and needs to be urgently upgraded.

Thus, every time the Grid’s San Jose substation facilities in Balintawak falter, all power plants from the North cannot be fed to the Grid to serve Metro Manila. That kind of congestion in the Grid causes the price of available power in the Wholesale Electricity Spot Market (WESM) to go up because there is less supply available to meet demand. It also results in blackouts that cause inconvenience to consumers and losses to businesses.

There was also one time when some large transformers of the Grid malfunctioned and believe it or not, they don’t carry spares because it is expensive daw for them to do that. What they did not factor was the expense to all of us from the blackouts that lasted for more than a few days while they were trying to fix the damaged transformers with epoxy and scotch tape.

The Grid was privatized because government did not have the funds needed to drastically upgrade the system that was too unreliable for comfort. Not too many people know that just prior to privatization, the Arroyo administration fattened up the Grid rate to attract investors. And it worked.

But the private sector investors that won the right to operate the Grid thought they have a scored a piggy bank. They are just skimming off the profits.

Early investors led by Ricky Razon cashed in handsomely. Henry Sy Jr who supposedly bought out Razon probably thinks he can do likewise. It is quite obvious from our recent experience that little attention is being given to the investments that must be made to make the Grid reliable, the principal justification for privatization in the first place.

The Energy Secretary should carefully monitor the management of the Grid to make sure the right investments are made. Secretary Almendras’ recent observations on the Grid management’s lack of transparency during the recent typhoon-induced crisis should alert the ERC to be more careful and demanding in evaluating the Grid’s performance.

It is distressing to read reports that the Grid is even now preparing to petition the ERC to allow it to recoup from consumers the costs of putting their lines back after Basyang. That’s simply adding insult to injury specially because the report came out at a time when not all of Metro Manila had been re-energized.

Other than scrutinizing the calamity related costs of the Grid, the ERC should also be stricter in assessing the performance of the Grid in normal times. At the very least, the ERC must make sure this congestion problem is addressed. We, the consumers, should not be made to bear the burden of the Grid concessionaire’s inability to invest properly in its facilities.

Before the ERC allows the Grid to raise their rates for whatever reason, the ERC must make sure the PBR system requirements are met. Our power rates are bad enough so that any inefficiency and unreliability constitutes consumer abuse that the government must not allow.

Hopefully, Henry Sy Jr who is supposed to be the lead investor in the Grid will do what he must to ensure the proper delivery of service. He has to be hands on. He cannot be a passive investor because that may put the good name established by his father and by his sister to serious risk. A Grid that merely collects profits but fails to invest enough to assure good service is not in tune with the legacy of his father.

Here is hoping too that the new Energy Secretary will continue to be proactive and will not end up as timid and helpless as the last ones under the Arroyo regime. It is the Energy Secretary’s job to ensure that the private concessionaire of the Grid delivers on its commitments.

SONA

Following up our observation last Wednesday on the need for P-Noy to share his vision for the country in his SONA, it would be well to warn him that it is no longer alright to copy the vision of FVR about making us a tiger economy. While a burgeoning economy is a worthy vision, it is no longer sufficient in the light of the dramatic increase in hunger and poverty over the last years. According to the latest survey of the SWS, some 4 million Filipino households experienced hunger at least one in the last three months… Worse, the number of people suffering severe hunger is rising.

One of our eminent economists commented in our e-group that while we need sustained high economic growth to substantially reduce poverty, our experience is such that whatever growth we have registered had not been inclusive… in other words only a few benefited. We have to do a lot better.

The economist observed: “One thing peculiar about the Philippine economy is its weak capacity to transform economic growth to poverty reduction, compared with most other countries of roughly comparable stages of development, even after controlling for the size of growth. Clearly, we need to do more than just economic growth.

“Improving the access of the poor to opportunities is crucial to making growth inclusive. We need, in particular, to pay attention to the social sector, especially basic health and education, including family planning services. Yes, the Conditional Cash Transfer program is a good initiative – far better than NFA subsidies, or even CARPer – as a vehicle to addressing short-term poverty while building human capital crucial to long-term poverty reduction.”

Another economist reacted: “The Philippine pattern of non-inclusive growth is because it has been focused on city-based growth sectors like call centers or industrial zones. It’s about time we make agriculture the foundation of growth. Unfortunately, therein lies the rub, because unless we correct the design flaw of CARP and CARPer, it would be hard to sustain agricultural, much more, overall economic growth.”

The point is, P-Noy must be careful about just stringing words and concepts around that seem to sound good. The danger of that happening is high because the SONA is one speech that is written by a committee and the tendency is to clip and paste the contributions of each Cabinet member. That’s why past SONAs sound so disjointed and meaningless.

If the vision of P-Noy, based on what he had been saying so far, is to build a just society where every citizen can truly enjoy the benefits of freedom and social equality, his proposed program of government should spell that out. Economic growth is a pillar because this is the only way jobs and livelihoods can be created. But so is trying to help the poor survive and catch up. Even his plan for Hacienda Luisita will have to jive with his broader vision for a just society.

Oh well… we will just wait and see what he says today. But for his and our sakes, I hope he inspires us to unite and work to realize a common vision that would make us all proud to be Filipinos. It simply is about time.

Golf and Sex

Jose Villaescusa sent this one.

Why is Golf better than Sex?

With golf, a “below par” performance is considered damn good. And if your equipment gets old and rusty, you can always buy a new one!

Boo Chanco’s e-mail address is [email protected]. This and some past columns can be accessed at www.boochanco.com