Pensions

Budget Secretary Ben Diokno put it rather succinctly: differentiate between candidate Duterte and President Duterte.

During the campaign period, Duterte promised to raise SSS pensions by P2,000 if elected president. Now that he is President, he must put as much importance to the actuarial life of the pension fund.

P2,000 might seem a minor amount for those who earn much. But it is a significant sum for our senior citizens who depend exclusively on their pension payments. It also means a lot for the life of the fund.

Without compensatory measures, granting the increase in pension payments will shorten the actuarial life of the SSS fund by 8 to 11 years. Should the fund expire, those working today and contributing to the fund will get no pensions. That will be a calamity.

Of course, government can make everybody happy by granting taxpayer money to boost the fund. That, however, will be an injustice – if not outright illegal. The SSS oversees a private fund, composed of the contributions of its members. Government merely appoints trustees whose responsibility it is to ensure sustainability of the fund.

Large as the SSS membership might be, it is still a subset of all taxpayers. It will be unfair to taxpayers to use public funds to rescue an imperiled private fund.

The problem with the SSS, more than the generosity it has shown for its senior officers, is that it has historically been benefit-driven. Its membership want to pay the least contribution to the fund and derive the most benefits possible.

In the end, the only way to increase pensions is to increase the contribution rate of its current members. The pensions paid out have been overtaken by inflation, making them almost a token rather than a sufficient source of subsistence. Those currently making contributions to the fund can expect their pensions to be less than comfortable when they retire.

True, the fund may benefit from more aggressive investments. But remember higher returns come only by assuming higher risks. No one wants to gamble with his pension money.

At some point, we really need to reinvent our entire pension system. Before that, we must have to accept the reality we cannot increase pensions without increasing contributions. We have to be hard-nosed about finances.

Victims

One might call them a coalition of victims. Two schools, one mall and the Philippine Chamber of Commerce and Industry (PCCI) filed a petition with the Supreme Court last Dec. 27 seeking relief from arbitrary new regulations by the Energy Regulatory Commission (ERC).

The new regulation requires big power users (those who reach a monthly peak demand of 1 MW of power) abandon their current power supply contracts and enter into new contracts with any of the 23 power suppliers chosen by the ERC to supply the “contestable market.” They have to perfect the new power supply contracts no later than Feb. 26, 2017 or suffer the penalty of disconnection and the payment of a hefty 10% premium on their contract price.

The new regulation is whimsical and abrupt. The big consumers are in contracts with their preferred suppliers presumably because they offer the cheapest price. Market forces defined those existing contracts. Now the ERC commands them to abrogate those contracts and choose from the commission’s list of 23 power suppliers.

According to Don Anton Daryl Chua, counsel for the petitioners La Salle, San Beda, Riverbanks mall and PCCI, “the new regulations… violate the EPIRA law and the Constitution. Instead of fulfilling the law’s mandate of promoting greater end-user choice through free and fair competition, the new regulations created a virtual cartel and compelled the petitioners to negotiate on an unequal footing with the suppliers chosen by the ERC, under an arbitrary deadline and a threat of severe sanctions.”

Under EPIRA, the proper role of the DOE and the ERC is regulating the power industry rather than coercing consumers to buy their power from preferred suppliers. Not only malls but large industries are now threatened with disruption because of the very short period allowed for them to substitute their power supply contracts to benefit 23 blessed power suppliers. This throws a cloud of uncertainty over our entire national economy.

Furthermore, it is more likely the power supplied by these blessed suppliers will be more costly than those now contracted by the big consumers. Otherwise, there would be no need for the coercive new regulations. Self-interest dictated the choice of supply contracts entered into by the big consumers. That self-interest translates into lower cost. No consumer will freely enter into a power supply contract if it meant higher electricity costs.

Because the new contracts being ordered by the ERC will be from a limited list of only 23 suppliers, this will surely have the effect of pushing up power costs. Consumers are bound to suffer.

If malls and factories are forced into new contracts entailing higher power costs, the additional expense will be passed on to the final consumers eventually. That means all consumers will be adversely affected in the end. What the ERC calls “mandatory contestability” will push up the costs of electricity, products and services across the board.

Since the ERC is a quasi-judicial agency, the only recourse left to defend the freedom of choice of consumers is the Supreme Court. This is the reason for the filing of the petition last week.  

If the Court rules in favor of consumer choice and overturns the ERC in this case, this will be a triumph for all.