Fall guy

Energy Secretary Jericho Petilla said the right thing, and then promptly waffled in the face of a populist backlash.

The right thing he said was that Meralco ought to seek a reconsideration of the Supreme Court’s December 23 issuance of a temporary restraining order against the power price spike. The sharply higher rate for December, reflecting the higher November selling prices of the power producers, was approved by the Energy Regulatory Board.

The December billings, even as they are intolerably high, do not fully reflect the cost Meralco incurred purchasing power from its suppliers as well as from the wholesale electricity spot market (WESM). The under-recovery is a problem that will force Meralco to incur carrying costs.

Meralco did not need Petilla to know that a motion for reconsideration is an available recourse. The energy secretary, however, said what he said because he thought through the repercussions of the TRO issued on the price hike. That TRO poses grave problems for Meralco specifically and for all businesses in the country eventually.

It is about as discouraging a signal to investments as any of the previous anti-business interventions of the High Court. Unbridled judicial intervention in the sphere of business multiplies the risks and uncertainties of doing business in our economy.

Should Meralco run into financial difficulties because it is collecting less than what it is paying its suppliers, our power situation could worsen. That possibility will be a nightmare for the entire economy.

If there is any profiteering going on, it is the power suppliers who must be laughing their way to the bank. They make the profits from what seems to be a failure in strategic planning and poor regulation while Meralco (nothing more than a collection agent for the suppliers) reaps all the blame.

If the sharp increase in energy costs is a crime, Meralco is the fall guy. The company  sends out the bills to the final consumers. It is the company most vulnerable to vilification. Consumers do not see the charges of the power producers. All they see is the bill sent out by the power distributor.

Definitely, Meralco should seek a reconsideration on that bizarre TRO (although this is understandably celebrated by all consumers). It does not seem the Supreme Court has much basis for this sort of disruptive, imperious and whimsical action.

Firstly, the Supreme Court seems to venture beyond its competence by meddling in product pricing and energy valuation. Electricity pricing might be a matter better handled by utility economists than by magistrates. The issue here is that the Court might be over-reaching its powers of judicial review.

As an aside, the vaguely defined parameters of judicial review in the 1987 Constitution has long been pointed out as a major reason for investor discouragement. It is on the agenda for constitutional reform.  Those undefined powers produced arbitrary nullifications of perfected contracts in the past, raising concern over the sanctity of contracts in this country.

Secondly, the Energy Regulatory Commission is an independent and quasi-judicial agency. By issuing that TRO, the Court could be rendering the ERC’s role inutile.

Third, the maxim is that the Supreme Court rules on matters of law and never on matters of facts. Energy pricing is a question of facts; not of law. The High Court might have no role to play on this matter.

Fourth, the Court’s TRO will likely spook investors even more. It could further discourage new entrants into the power sector (which we direly need at this time of increasing scarcity and high costs). It could spook investors across the board, in fact, and damage our economic prospects.

Lastly, the Supreme Court’s strange intervention on this matter will not in any way solve the real problem bugging our energy security: the fact that energy demand is quickly outstripping supply. This is the strategic problem the Department of Energy so far failed to address.

In the end, the Supreme Court does not only meddle in a matter beyond its competence. It muddles the situation horribly. It makes it even less likely we could sort out the strategic problems of our power industry and keep our economic growth on solid footing.

Cory Aquino, when she was president, abolished the Energy Department on a whim. That created a power shortage that sunk our economy and condemned millions to poverty.

Her son’s administration is well on its way towards another power shortage. Not enough new generating capacity was installed the past three years to meet rising power needs. The price spike is, in fact, the outcome of an inconveniently narrow energy reserve.

The Supreme Court just helped bring us nearer to darkness by complicating the policy equation energy investors need to deal with in making their investment decisions.

Bad year

We are all happy this cursed year is finally ending.

This has been a year of calamities. Fierce typhoons ravaged northern and central Luzon, laying waste to our agriculture.

Then Zamboanga happened, a situation that might have been averted by more adept leadership. A neglected rebel band ran amuck and the response was badly thought out. The result is a ruined city.

Then Bohol happened, exposing the serious problem of substandard structures erected using smuggled steel products.

Finally Yolanda happened, creating a wide swathe of destruction. Government’s rescue and relief response was mocked the world over. We can only wish the rehabilitation will be better led.

All the destruction will take some wind out of our economic expansion, making poverty even more widespread.

Let us hope the New Year will be kinder and gentler, all the incompetence notwithstanding.