Corporate drama

I. On Meralco

meralco.tiff

Blogger village idiot savant says the administration’s been “taking a cue from professional wrestling:

In professional wrestling parlance, it’s called “generating heat.” Being the scripted entertainment that it is, wrestlers rely less on their physical prowess than on various gimmicks to stay in the fans’ visibility. And so, if a wrestler wants to rise in popularity, the trick is simple: pick a fight. It doesn’t matter with whom. Anyone will do. Just pick a fight.

That seems to be the overall stratagem of the Arroyo administration of late. In the absence of any issue of substance, it’s resorted to cheap gimmicks to generate heat. Just a few weeks back, Gloria Macapagal-Arroyo vowed to go after rice hoarders, and for a while, the front pages were rife with inspections and arrests. Around the same time, Gen. Angelo Reyes called for an energy summit and demanded to know why fuel prices were so high.

And so the public relations offensive continues: GSIS bigwig Winston Garcia is taking Meralco to task for high energy costs and “lack of transparency”; and over in Congress, Prospero Nograles has floated the idea of free text messaging. It’s gearing up to be a big battle royale : the government in one corner and big business — the oil companies, the telcos, and the Lopez utility-media empire — in the other.

In a match like this, there’s little doubt as to who’s the face and who’s the heel. The cards are lined up so that we know who it is we’re supposed to be cheering for. And yet, why do the bleachers seem awfully quiet?

Answer: we’re not marks. We know that, for all the amusing antics, it’s fake. It’s all fake.

A similar view’s expressed by The Philippine Experience. Over at Arbet Loggins @ Multiply, there’s a point-by-point critique of Winston Garcia:

One: Garcia is barking up the wrong tree. Meralco cannot impose rate increases unless it is approved by the Energy Regulatory Commission, which is headed by a Gloria Arroyo ally, Rodolfo Albano. Garcia should instead petition ERC to reduce Meralco’s rates. This regime keeps on asking us to follow the rule of law, yet one of its lackeys keeps on ventilating on the wrong forum. “Bring it to the courts” is a favorite line by this regime, and it should walk the talk.

Two: Garcia’s allegation that the Meralco management is withholding important documents. As a board director, he should know what is happening to the company. And if he thinks the Meralco management is indeed withholding the documents that he needs, he should ask the courts to compel Meralco to produce these documents.

Three: The issue on systems loss is actually not a legal issue, but a moral one. The law allows Meralco to pass to its customers up to 9.5% its system losses. So if Meralco charges us 9.5%, it is not illegal. It can be immoral, but rule of law prevails.

Four: Meralco passing on to its customers its electricity expense. This is allowed by the law; heck, all businesses factor in electricity expense in the pricing of their products and services. Singling out Meralco is unfair, I think.

Five: Knowing that it can actually lower rates by petitioning ERC and removing/reducing VAT on electricity, this regime has chosen to do what it says the opposition does – trial by publicity.

To be sure, there are those rather gleeful about the showdown (see maexstayo; on a related note see Dan Mariano who takes a look at how the p.r. war’s been fought out by the Garcia camp), or actively hostile to it (see Adventures of an Exiled Aristocrat who is overseas, ). But in general, what’s remarkable is the ambivalence of the public. This is something I observed in my column yesterday, Get-rich-quick Garcia .

You may want to read the following: What Meralco has been charging its customers and Meralco swamped with refund claims. Concerning some points raised in my column, you may want to refer to Meralco Refund for the Period 1994 TO 2002 in Bulatlat.com (and how party list representatives have it right: Leftist solons to petition ERC for Meralco refund); the Energy Regulatory Commission website; the Temasek Holdings website; and What is a Corporate Raider?

A more accurate representation of (informed) public opinion might be Pinoy Observer:

In truth, I’m not supporting Meralco. My stand is to carve it out into different franchises to encourage competition. However, I am not supporting government bid to takeover Meralco now since we know for sure that the utility firm will just be given to Gloria’s allies, namely, the Aboitizes, Garcias and the Alcantaras. Surely, this crown jewel of the Lopezes deserve nothing more than a clean bidding process. It should be managed by groups with the national interest at heart. It’s okey for them to recover their investments, yet, there should be more consideration on the public’s consumer rights than business interests. And the Lopezes want nothing of this sort.

Personally, I believe that if any problem exists, then the problem is one of scale. Meralco’s gotten too big. It’s gigantic franchise area happens to include both the most productive parts of the country (commercial areas), some of the most lucrative (residential areas of the middle and upper classes), and extremely large black holes -the areas in which the very poor live- all of whom have to be served but not all of whom are paying customers or who can afford to pay full rates. Comparisons with costs in Cebu, etc., then aren’t fair ones to make because other areas do not have the problem of large swathes of the population living on the border of the poverty line at best. These areas essentially have to be subsidized, both for poor but paying customers and those who derive their electricity from pilferage. The government tried to mobilize public support by basically playing off the middle class against the poor, portraying the systems loss charge as an unfair subsidy.

Tongue In, Anew asks, Should We Pay Meralco’s Systems Loss Charge? and defines systems loss simply:

To make things simple, systems loss is the difference BETWEEN the total power generated by the plants AND the sum of all the power ACCOUNTED FOR in the residential, commercial and industrial electricity bills. Not all is stolen, though.

Someone who manages buildings told me something similar. A systems loss occurs even in buildings, according to the manager. You know, through the building meter, that a certain amount of electricity is brought in; if you meter your tenants and then your common areas, you also know how much electricity your tenants consumed and the common areas used up. But somehow, even if you meter as much as possible, there’s simply a certain amount that simply vanishes, apparently consumed but not by anyone, specifically.

Anyway, Tongue In, Anew goes on to put systems losses in perspective and proposes a novel solution:

It’s standard practice worldwide that distributors are ALLOWED a certain amount of systems loss since there are no perfect machines, so transformers and conductors are not an exemption to this. The amount of energy leaving the power plant will always be bigger than the energy that the distributor will collect based on the meters.

Therefore, technical losses are inherent to the system thus, we can allow Meralco or whoever runs distribution to pass this on to the consumers wholly.

Some may argue that technical losses can be minimized. That’s true but in the case of transformers, oversizing is the only way to improve efficiency, but that will also increase capital machinery cost and the bottom line is it will just be reflected on the Return On Rate Base (RORB)- a percentage of profit the government’s regulating agency like ERC, or a law like EPIRA, may fix for utility companies. No gain there. Conductors? Copper is the cheapest material presently known to man that serves the purpose. Improving systems loss on conductors by installing silver or gold cables will definitely be a bigger headache later.

Pilferage, the last time I checked is already a crime. Going after criminals is whose business, Meralco? Of course Meralco will be needed to identify and prove pilferage, but excuse me, I have yet to see PNP Chief Razon or Sir Raul O. Gonzales who heads NBI ordering their men to investigate wide scale pilferage in many squatters’ areas in the Metropolis. Or a systems loss investigation for whole cities and provinces.

To ensure Meralco will participate in apprehending and prosecuting pilferers, a reward system is necessary even if just to reimburse Meralco for its expenses and effort.

In this case, I say charge systems losses from pilferage to government This government wants to earn taxes without doing its job? By charging it to government, they will be forced to protect the paying consumers and ensure that the distributors will be rewarded. The present system only encourages thieves and punishes honest consumers. Do I hear a lawyer saying it’s unconstitutional?

So back to my view…

The question then is whether, and how, government should go about cutting up the Meralco franchise area? Winston Garcia’s basically proposed to do it by means of a boardroom coup. But his past record, at this point, becomes relevant. He’s a corporate raider, not an entrepreneur. His abilities lie in swooping in on a company and then making a tidy profit from his barging in and breaking its existing ownership structure. This is why he changed tactics mid-way: the perhaps more sensible goal of breaking up Meralco came later, and not initially when he began his attack (note to self: servants of the present dispensation are amazingly selective; what is sauce for the senatorial goose is obviously not sauce for the administration gander; to mix my metaphors even more, no fishing expedition’s reprehensible if undertaken by the government).

Over at ANC I told my producer that personally I felt that it would be healthier for the Lopezes to be made to decide between transmission or generation but not both; better still, for them to divest from energy and focus on media. I have no confidence that forcing a separation between the two interests of the family will serve the public good at this point. I have a hunch -but only a hunch, based in large part from what Maria Ressa’s revealed about tensions within the Lopez family– that this will be the way things will develop eventually, but only after the generation of Oscar and Manolo Lopez passes from the scene. One branch may continue in energy while another focuses on media, but the era of the regimented family corporation will have passed. As much a function of the business scene getting more sophisticated than any actual wisdom on the family’s part.

Meanwhile, as the Business Mirror editorial yesterday counseled, what government can do is go great guns for Open Access:

The National Economic and Development Authority (Neda) explains it this way: Industrial and commercial consumers, including malls, factories and five-star hotels, who use up at least 1 megawatt of power during peak hours can deal directly with independent power producers, or IPPs. The interim open-access scheme, which will be proposed by the IPPs to the Energy Regulatory Commission (ERC), removes distribution and system-loss charges being charged by power-distribution companies, including Meralco.

The interim open-access scheme, according to Neda, is a stop-gap measure to allow consumers to directly deal with IPPs even if the government has yet to privatize most of its power-generation assets.

The advantages of open access are obvious. One, it will allow end-consumers to choose the electricity supplier that offers lower rates. And two, it will create competition and ensure a level playing field where no dominant player can exercise undue advantage, thereby leading to lower power rates.

Apart from open access, various groups are also calling on the government to remove the value-added taxes on fuel and even on the system losses and royalties on indigenously produced natural gas. These are sound proposals that we think should be seriously considered by the government.

The elimination of royalties for gas and oil used domestically is a subsidy, and apparently one practiced in places like Malaysia and Indonesia.

As for the ongoing drama, the way it’s playing out can only set back efforts to entice investments unless the investors’ idea of a good business environment is being cozy with a particular administration, which means they’re in it only for the short term. On the eve of the meeting, it seemed that GSIS execs concede defeat. But it seems that’s before the SEC was brought in -or the so-called concession was actually a ruse.

If this GMANews.tv report is correct -see Analyst: SEC intervention in company stockholders meet unprecedented – then corporate types are getting nervous. No coincidence that the President has had to make soothing noises: Arroyo vows ‘friendly environment’ for business. She’s skating on pretty thin ice (see last Sunday’s Inquirer editorial).

As it stands, after a truly unedifying exhibition of corporate groupthink (see Boos, pro-Lopez chants greet GSIS chief at Meralco), the stockholder’s meeting quickly stalled (see Reuter’s Fight for control roils Meralco meeting ) but has now resumed: ABS-CBN says Meralco board election to push through after halt and ‘Meralco meet has quorum, election to push through’ . Looks like this may end up in court, as as Marichu Lambino explores in her blog:

Based on the news report, the grounds of the CDO are: the SEC acquired jurisdiction over the complaint filed by board director Winston Garcia and there was a “finding” that the proxy validation process was “fraudulent” or that some of the proxies were “manufactured” (i don’t have a copy of the order, i’m paraphrasing). The grounds of the majority board are: the CDO is invalid for being issued by just one commissioner and not by the Commission en banc and it is undated.

What happens next?

It depends. (And, not having a copy of the order, i won’t give my own opinion, just scenarios). In the face of an “order” from the SEC or an SEC commissioner to cease and desist, the majority board can successfully maintain its defiance if it is able to successfully show it was correct in its theory on the jurisdictional “issues”. Remember the oft-quoted principle, “Jurisdiction is conferred by law”? If the order was issued without jurisdiction, it is void. No amount of words and paper can confer jurisdiction, it is given by law. On the other hand, if the order was issued with jurisdiction, while it cannot retroact once elections are held, or while it cannot turn back the hands of time, to be metaphorical, because the matter had become moot and academic, the SEC can issue ANOTHER CDO preventing or stopping the newly elected board from exercising functions. Then the SEC will hold hearings on the allegations regarding the proxy votes. Pending that, the SEC can appoint a temporary management committee. And then later on, the SEC can nullify the elections held today.

The latter scenario: if the SEC or the SEC commissioner HAD jurisdiction in issuing the order and the majority board defied a valid order: (i will use my Keanu Reeves voice for that): Dude, that scenario is messy. But if the SEC or SEC commissioner did NOT have jurisdiction in issuing the order, then GSIS chair Winston Garcia has to go the long route of litigation and pending that, the newly elected board takes over, that’s temporary smooth-sailing for MERALCO pending litigation, but either way, the value of the stocks might continue to go down because of the uncertainty.

II. On the Lakas-Kampi Merger

EDIPENCE.jpg

(forgot where I looted the screencap above)

In his blog, Mon Casiple says there are signs the administration has decided to throw in the towel, as far as perpetuating itself in power is concerned:

The GMA administration, it seems, has already left behind its obsession to stay in power. It may have failed to get the critical political mass to push it through the various obstacles to such a scenario. Its moves in the past week or so has been to satisfy loyalists, ensure their transition, and blunt opposition. These point to a 2010 election scenario.

Obviously, presidentiables are waiting in the wings for this. We can expect a more active effort on their part to get the Malacañang quiet endorsement without unduly exposing themselves to an anti-GMA voting public. The ruling coalition may not escape unscathed — it will be subjected to severe pressure from all sides and will be hard-pressed to unify behind one candidate. It does not have a viable candidate at the moment.

Casiple points out that all this is taking place without the electorate really figuring in the picture. I’ve heard that various components of what will, hopefully, emerge as a Reform Constituency are starting exploratory talks with each other, even as the Lakas-Kampi merger‘s apparently hit a temporary snag.

A review of an HBO film, “Recount,” about the controversial Florida vote in 2000, brings to mind the kind of argumentation the present administration’s perfected:

In the end, Baker and company best Klain’s team. The film leans in the direction of the Gore camp — they are the underdogs after all — but as Baker points out about the Bush team, “We won every single recount. The system worked. No tanks on the street. Peaceful transfer of power. The strength of the constitution and the rule of law.”

He says this, but in one of the strongest sequences in the film, you see the Miami-Dade canvassing board being intimidated into shutting down the hand recount by a mob that’s allowed to go into the building and storm the hallway. Those protesters were orchestrated and financed by the Bush campaign. Those tactics, including turning the recount atmosphere into a circus with grown men dressed like babies, holding signs that say Gore is whining like a baby, and kids in tee-shirts that said “Gore lies,” undermined the process. It was right out of the Nixon dirty tricks playbook. You don’t see anything like that from the Gore side. The Gore camp is all about strategy, turning the law inside out to get the votes counted. Their cause is not to give Gore the win, but the count the votes. The Bush camp simply wants the win they think they’ve already won…

And as for the votes, in a scene that evokes Raiders of the Lost Ark, Roach shows us the boxes and boxes of ballots in a Florida warehouse. Still there, still uncounted. Who the hell really won that election after all?

Like a chad, the question’s still hanging.

III. On Crispin Beltran

The passing of Rep. Crispin Beltran of Anakpawis, a true patriot according to Uniffors, and whose death had the Justice Secretary commemorating it by pissing on his grave (I agree), has been eloquently marked in two entries by Achieving Happiness, see her Crispin ‘Ka Bel’ Beltran, mahal kong boss at Kasama and Hay naku, Ka Bel! . She also takes the Catholic Church to task in Kato-liko.

Concerning the Catholic Church, the response of the hierarchy in Beltran’s native province points to how the alliance between people of Beltran’s political persuasion and the clergy dating back to martial law, has essentially been abrogated. A new generation of bishops and even priests is on the scene, and their views can no longer be viewed as sympathetic to leaders in Beltran’s mold.

As for me, he was a man loyal to his class, faithful to his principles, and the point is not whether I disagreed with some of those principles, but rather, that he served those principles dutifully and well. I took pride in shaking his hand on the Session Floor of the House after his release; his detention was a scandal and that few so-called democratically-inclined Filipinos took that scandal to heart was a scandal in itself.

He was, through Felixberto Olalia, Sr., his former mentor, directly in the line of true labor leaders like Crisanto Evangelista -and what could be said of Evangelista, and in turn, Olalia, could be said of Beltran. He served incorruptibly and ably.

IV. On the RCBC tragedy

While Touched by an Angel focused on the human dimension of the grisly bank robbery, her husband, The Warrior Lawyer, delved into what was particularly horrifying about the crime, which was the methodical liquidation of witnesses. He says the loot must have been so vast that the robbers could afford to leave behind a small fortune because the banknotes were soiled with the blood of their victims. He also points to the murder, the week before, of Alfred Dy (see Geronimo Sy’s tribute to his murdered friend; Sy says Dy had been held up once before, leaving the same bank branch). The Warrior Lawyer says of the two crimes that,

Both incidents seem to indicate an “inside job”, as a tipster from inside the bank seems to have alerted the robbers in the killing of Atty. Dy, while there was no sign of forcible entry in the RCBC robbery. In fact, probers surmise that the RCBC victims were killed precisely because they knew or could identify some of the perpetrators.

Blogger At Midfield describes the ongoing “investigation” as something like bad movie rerun, and The Warrior Lawyer, so to speak, returned to the scene of the crime: read his review of the cops’ handling of the investigation and why it’s so troubling (either pure bungling or a cover-up, simply and disturbingly put: see The Paradoxical Ley Line, too ), but I’d like to focus on the question Warrior Lawyer raises (see also Don Sausa):

Next, the question on a lot of people’s minds is why the crime was vicious in the extreme. The obvious answer seems to be that the robbers wanted no witnesses. But the diabolical, execution-style killings upped the ante on the lengths criminals are willing to go to escape prosecution. They will kill with impunity and without remorse.

But what could push them to such inhuman ferociousness ? Poverty is often cited as a factor. But that’s only part of the story. The Philippines literally has millions of people living in destitution, but they don’t turn into mass murderers. Otherwise, we’d all be dead.

I think Conrad De Quiros was correct when he wrote that the execution of the RCBC bank employees should be seen in the context of the widespread violence being perpetrated by the present administration all over the country…

Indeed, why would the RCBC robbers have any compunction about killing when the first to break the laws of God and man are those sworn to uphold them in the first place ?

To take Mr. De Quiros’ argument further , it’s not just a question of state violence, but also of unbridled corruption that goes all the way to the top. Why should the Cabuyao killers not steal millions at gunpoint when our national leaders routinely steal twenty, fifty, a hundred times over with the stroke of a pen, after a few secret meetings ?

…I fear that the RCBC robbery has now become the template for future acts of a like nature. Almost surely, we’ll be seeing more bank robberies in the near future, simply because, as bank robber Willie Sutton supposedly answered when asked why he robbed banks, “that’s where the money is”.

Incidentally, the Warrior Lawyer also points to a remarkable follow-up to the crime:

A final note on the gruesome photographs of the RCBC murder victims now circulating on the internet. They could only have been taken by police investigators at the crime scene and it’s reasonable to assume that someone in authority deliberately leaked them. I’m of two minds about it. It would certainly be painful for the victims’ families to have their loved ones’ grisly deaths exhibited in so public a manner. A valid argument for desecration of the dead can also be made. At the same time, the graphic and compelling nature of the images ensures that the crime will not easily be forgotten. Viewing it brings about an almost uncontrollable gut-feeling of deep anger and moral outrage. Owing to its viral nature, it has also reached far more people than what would normally be possible through news reports alone. Maybe it’s just what we need to spur us into action to battle these and other, more insidious, forms of evil so prevalent in Philippine society. No sane person can be neutral about it after seeing the pictures. As a the old adage goes, a picture is worth a thousand words.

Unlike the Warrior Lawyer, I’m not so sure this is something that can be pinned on a general deterioration of society because of the negative example of the administration. It might be more accurate to say that it reflects the low regard the perpetrators have for a specific institution, the Philippine National Police, and for the specific command holding the reins of command at present: the influence of the administration may be in that it attempted a kidnapping and liquidation and was caught, and police officials were left twisting in the wind when the Senate investigated the Lozada abduction -and the cops accepted the humiliation inflicted upon them by the Palace.

That, and the vulnerability of the civilian population in institutions like banks and in the provinces, which breeds a feeling of impunity on the part of robbers.

Indeed, I think we should be alert to whether we will start seeing more of these sort of crimes. There was an element of terrorism in this crime. The scuttlebutt among bankers, according to a colleague, is that bank robberies spike in May because tuition’s due.

For a background on the rising cost of education -and remember, the rule of thumb is business in general is slow in May, as families scrape together tuition expenses- see Filipino families and government spending less on education. The government’s response? Arroyo halts college tuition hikes. I am skeptical of trying to solve problems by basically decreeing that the law of supply and demand be suspended. A good education costs money. That money can come directly from parents or the state can step in and subsidize education. The President’s solution helps parents short-term, but at the expense of students, long-term.

Returning to the RCBC tragedy, The Unlawyer pointed to the tragedy being part of a series of shocking crimes and how it’s revived the debate on the death penalty.

But there’s something else I’d like to point out. Just a hunch. It’s that the moneybags are building up their reserves. Syndicates are flexing their muscles.

Before elections, there’s a noticeable increase in bank robberies and an escalation in instances of general mayhem, from snatchings to drug deals gone sour, etc. See Sheila Coronel on gambling money and elections. As for drug money, this has been nagging at the back of my mind ever since I encountered what Third Wave blogged about it back in February: it’s a factor no one wants to factor in when it comes to elections. And refer to what Alex Magno told me and which I blogged on March 9, 2007:

The reason businessmen can afford to ignore and actually evade the politicians is that they are no longer at the mercy of the politicians they way they used to be. The era of currency controls is long gone; and the old sugar bloc (divided into the faction of planters and millers) is long gone. Instead, the columnist (Alex Magno) told me, politicians are really in a lose-lose situation: elections are getting even more expensive, but there simply isn’t enough money coming in to finance them. So, he says, the real kingpins in politics are those with illegal funds who now play the role the big businessmen used to play:

!. Drug money

2. Gambling Money

3. Quotas on Customs and the BIR

4. The Philippine National Police

Whether these dots can be connected to RCBC remains to be seen. But think about it.

V. Other matters

Overseas, in the Asia Sentinel, The Dollar’s Dead Cat Bounce has Peter Schiff advising people to dump their US dollars, while Peter Bowring looks at how Asian Fuel Subsidies Distort the Energy Market.

On China’s earthquake, the Economist writes approvingly of how China helps itself.

And Pico Iyer writes of the Dalai Lama that Behind the Saffron Robes, a Savvy Politician.

In the blogosphere, PrOsTiTuTeD_LiBeRaTiOn in Cebu takes a look at whether it’s really the administration’s heartland, and tries to take a nuanced approach to the problem of fighting for accountability while avoiding throwing the baby out with the bath water:

Public dissent in Cebu, however, does not manifest in every means that of Metro Manila does. Rallies are very unpopular here. What is apparent to an observer who is not in Cebu is the disposition of its top politicians, the church- or the head of the church- and the media. They try to speak, and act, in behalf of the people but often, they fail- deliberately or not.

I am convinced that the general sentiment of the Cebuano people over the NBN-ZTE scandal, for example, is disgust. Our politicians, however, continue to proclaim allegiance to the president but I don’t think that it is because the people who voted for Arroyo do not call for accountability and do not see her culpability. I think that we are highly misrepresented.

The cab I was riding on my way to work some time last month was tuned into a local AM radio program, and I was fascinated with the comments sent, thru SMS, by the listeners on the issue of household rice hoarding which they conscientiously lambasted as a big stupidity. This government, they suggested, and I agree, is as thick-faced as to blame the people for the current crisis. One of these days, they said, the same government will accuse us of corruption- of stealing our own, taxpayers’ money. I think that the message of its sarcasm borders on the truth that anything is possible with the government that we have- anyone, and anything, is a potential scapegoat. That explains why the Lozada noise was suppressed by the rice crisis, and why Meralco takeover is cooking. I understand that these two issues deserve the people’s attention but see how nice and dirty the administration plays?

Very little has been said about Cebuanos who feel and think the same way that I do. This is not to claim that I think differently. My point is that I get dismayed with the lack and oftentimes, the absence of mobilisation in the local media. The perceived indifference is one, a failure of the media to get into the bottom of the people’s sentiment and rouse the people from stupor even as necessary; two, a failure of the local government to liberate itself from the shadow of the President and three, the obsession of some Cebuanos to be called “different,” specifically, being different from Metro Manila. I noticed how some people would deliberately ignore issues that call for collective action- Northern Imperialism is overrated.

I am glad that the third factor I proposed invited some friends to speak out. I was told by one that it’s a matter of efficacy- what can a rally in Cebu do to oust Arroyo? Pretty much nothing- just a potential investor who changes his mind about putting up his business in the city. Another friend told me over coffee that, yes, we are naturally regionalistic but that it is just a matter of preserving the momentum our economy has gained in the last five years- are we willing to sacrifice all these?

Being in the BPO industry, I can come from a call center boom perspective. Honestly, I think that outsourcing will still be with us in the next ten years regardless of whose administration we have. I want to think that the economic growth in the past months is not a cancer but a cure. When I come to juxtapose the value of the peso and the pinch of inflation, I start to think again. The abuses of the administration is a very expensive price to pay so I wonder if we can ever concretise what it is that we are sacrificing our moral imperatives for. I gloat, and gleefully, at that, when I scan the paper and see the peso plunging from 40 to 41 or 41 to 42. No, that I have dollars to exchange for pesos but that I see the foreign exchange as the administration’s talisman- like nothing can touch it as long as the peso is strong.

I still beg to disagree, with all due respect, that another People Power revolution is the next bold step to make. I was in Fuente Circle along with the hundreds of students who protested against the suppression of truth in not opening the “second envelope” in the heights of former President Joseph Estrada’s impeachment. I was there and I cheered (aged 19 and oblivious to the dangers of the game) as the names of the generals withdrawing support from the government were being announced. How far have we gone after that? Ours is a vicious cycle- the president we install after the revolution owes the military (and only the military) the debt of gratitude. The same president would only want to keep the military to stay in office. Much has been said about the excesses of the military in Arroyo’s presidency, I am tired of it- a president surely knows whose loyalty he should keep.

This article is not an attempt to justify the perceived indifference. This is an attempt to give voice to the Cebuanos who have given Arroyo a chance but have been disillusioned– the taxi driver who tells me he has always tuned into the NBN-ZTE hearings and believes the truth Neri is hiding is right under our nose, the newspaper vendor who insists it is the president’s husband who is screwing up her office and the officemate who can’t explain how the prices of even non-petroleum products and less-processed foods rocket– I am one of them.

The views expressed above, I think belongs to a significant group which hasn’t had its concerns addressed by the various opposition groups over the past few years. We will see if efforts to ramp up the impeachment in October finally manages to inspire such people to get involved, politically.

And the last word on the debate on The Canon of Philippine Literature, courtesy of ExpectoRants:

I think Sassy’s basic error in her questioning and line of defense is that she was criticizing something she didn’t bother to study in-depth, thus she came off “philistinic,” in the words of Exie Abola. Trouncing a critically acclaimed work just because one didn’t understand it because it’s too hard indeed smacked of something unswallowable. No wonder the academic and literati types were up in arms, what with all that intricately hard work of theirs brushed aside in such a cavalier fashion. As Angela Stuart-Santiago wrote, Sassy would’ve made a better argument had she claimed, for instance, that Amado Hernandez’s work is a piece of leftist propaganda; she could’ve made a more passable argument and spurred a more interesting exchange.

Nod.

117 comments

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    • Nick on May 27, 2008 at 2:04 pm

    Great to have you back Manolo, anyway, will take a while to read this.. I assume, I’ll get back to the whole post in a couple of hours.. After all this post is almost like a weekly dose.

    • mlq3 on May 27, 2008 at 2:13 pm

    yes, it’s a week’s worth of entries that underwent a lengthy gestation.

  1. WTF is “edipence”? “Edifice” could have been the intention. It’s disgusting someone affixed a president’s signature to a document which hasn’t been proof-read. Onli in da Pilipins!

    • Nick on May 27, 2008 at 8:12 pm

    I definitely agree with regards to Beltran.. Much has been written already, most will have said that they did not agree completely, but in the end, admired the man for his convictions.

    And on a side note, I wrote about that pissing on the grave statement made by DOJ Secretary. Honestly, a man as tactless and disrespectful as he is, especially in such statements, is the perfect ally of an Arroyo Administration. The attack dog, attacking a dead man.

    • vic on May 27, 2008 at 8:40 pm

    But in Professional Wrestling, the Spectators get their money’s worth in Entertainment, whereas in the Administration the spectators (as in the Public) lost their money without getting anything worth for it…not even the “heat”.

  2. Therefore, technical losses are inherent to the system thus, we can allow Meralco or whoever runs distribution to pass this on to the consumers wholly.

    .

    wow a no-brainer solution. this is tantamount to putting the blame of the stupidity and inefficiency of people in the operation to the consumers.

    Every person using the thinking cap knows that the system loss includes pilferage and theft of power and a Republic Act has given the utility firms the teeth to bring these thieves to court or penalize them with fines and surcharges. A former neighbor of mine who had a printing business in his backyard and used a jumper to lower the electricity consumption was slapped with penalty . Until he paid the amended elec. consumption, power was not restored in his residence and shop.

    In manufacturing concerns, the losses from production are acccounted for in every stage to identify at which process , losses were incurred. Was it at the start of the production, during the work-in process or in the finished goods stage?

    It is not as simple as saying, there is no such thing as perfect process where no losses are incurred so allow the companies to charge losses. True. But for a public utility firm such as MERALCO, it is best that the consumers should know what causes these losses. If they come from thefts, then by all means they should show how much costs were recovered and how much were not recovered and why.

    In non-public utility companies, they may even charge bad debts as loss but they do not make up the costs of the product. They are deductions from the profit from operations.

    Besides, the consumers can just stop buying the products which are non-essentials, unlike in public utility, the consumers can not afford not to use electricity.

    The statistics above do not show how the firm is being efficiently managed.

    The EPS’ increase alone will not tell the whole story.

    • cvj on May 27, 2008 at 9:54 pm

    In China and Vietnam, the likes of Crispin Beltran have been running the country, which explains why they are economic success stories while we are still forced to sit through intramurals between Oligarchs.

    • cvj on May 27, 2008 at 10:02 pm

    Ca t (at 9:52 pm), i don’t think you can regulate or legislate away the Second Law of Thermodynamics. Even black holes are subjected to that law (which is why they are believed to evaporate over time). It’s even more immutable than the Law of Supply and Demand.

    • KG on May 27, 2008 at 10:15 pm

    I love pro wrestling,I was a mark. early eighties sinabihan na ko na fake pero it took a few more years for me to accept it.

    Heat in pro wrestling is showing enthusiasm from the audience side and generating enthusiasm from the promoter’s side.

    catch the rice horders, after so many years of its knowledge of its existense.

    Lower the power rates,after many years of allowing it to stay that way.

    Is that the way to generate heat, they should hire the creative staff of WWE.

    • supremo on May 27, 2008 at 11:01 pm

    Before this degenerates into a catfight, Duh Cat was talking about losses due to pilferage and CVJ about ohmic losses. They are 2 different components of system losses.

    • magdiwang on May 28, 2008 at 2:54 am

    In China and Vietnam, the likes of Crispin Beltran have been running the country, which explains why they are economic success stories while we are still forced to sit through intramurals between Oligarchs.

    i thought china and vietnam were succesful in attracting foreign investments not because of some brilliant policies from the two countries. it is due to the greedy policies of industrial capitalists from the west to increase shareholder value taking advantage of the slave wages from the east. when the wages there crosses a threshold where it becomes expensive to do business with them, they will probably go to africa to take advantage of the situation as well.

    • magdiwang on May 28, 2008 at 4:22 am

    what a spin meralco is peddling around. groceries and department stores have significant system loss from pilferage, theft and spoiled goods. they dont pass the cost blatantly as meralco does to the consumers. they try hard to minimize it to remain competetive in terms of pricing.

    its so convenient for meralco not to upgrade and make the necessary changes to reduce such losses as they operate a virtual monopoly in localities they control who have no choice but to deal with them. greed will eventually catch up with them.

    • cvj on May 28, 2008 at 4:35 am

    magdiwang, while we should not condone labor exploitation (and inequality) that is present in today’s China, your description is an incomplete account of what’s happening – a cartoon version that assumes that all foreign investors are evil and that capitalism is evil, which is not necessarily the case. The Philippines and India are also benefiting from these foreign investors via the outsourcing boom. The difference with China is that they are able to attract foreign investment in manufacturing activities as well.

    In any case, attributing China’s success to foreign investment puts the cart before the horse. China’s economic takeoff which started in 1978 was triggered by growth in domestic businesses i.e. farmers selling their surplus (over and above their production quota), township-village enterprises (joint ventures between local government and local entrepreneurs) and special economic zones. Once the foreign investors saw the potential, then they came in.

    It also ignores the groundwork that was laid by Mao’s revolution in 1949, i.e. kicking out China’s Oligarchs and addressing the problem of inequality which paved the way for the effective implementation of Deng’s reforms in 1978.

    • Bencard on May 28, 2008 at 4:46 am

    loss prevention is the sole responsibility of corporate management. it can no more rely on the police or the government to do that job than on its customers. while pilferage is a crime, no one could, or should, expect the law enforcement agencies to act as round-the-clock sentinels watching hundreds of thousands of meralco customers.

    meralco’s practice of passing on losses due to theft of services to the consuming public (regardless of legality)is a rip off in every way, shape or form. why would it care if 99.9% of its customers are stealing services? the cost is charged back to them indiscriminately, anyway, along with the cost of its own consumption? meralco claims such practices are allowed by law. who authored that legislative shit and how come it has never been questioned all these years?

    • cvj on May 28, 2008 at 4:50 am

    supremo, i agree. In his blog entry, Tongue was careful to make such a distinction as well:

    My proposal would therefore be determine systems losses separately for technical, pilferage and administrative. Check if the technical losses are within standards and set a limit there. Pilferage is the responsibility of government so they must account for it. Absolutely no pass on. Reward the distributor if it helps catch power thieves. Administrative losses must ensure only the power consumed for integral essential activities are allowed to be passed on to consumers. – Tongue, in Anew

    Ca t ignored Tongue’s careful distinction and she seems to be under the impression that all losses are due to “stupidity and inefficiency of people in the operation to the consumers” completely overlooking the underlying physics.

  3. In this case, I say charge systems losses from pilferage to government

    And who is the government? the people. whatever the loss the government incurs is borne by the taxpayer. sheesh

    • cvj on May 28, 2008 at 5:29 am

    If government takes over Meralco, then any losses will be borne by the taxpayer.

  4. Ca t ignored Tongue’s careful distinction and she seems to be under the impression that all losses are due to “stupidity and inefficiency of people in the operation to the consumers” completely overlooking the underlying physics.

    Don’t i know what technical losses are. it is you who have the impression that technical losses can not be managed and therefore it cannot be avoided.

    but technical losses can be reduced and this is precisely where that inefficiency and stupidity of the management apply.

    technical losses depend on the system installed, capital equipment procured, load factor, voltage utilization and system management.

    The continuous use of equipment which is no longer cost efficient and can no longer support the additional and the
    fluctuating voltage utilization contributes to TECHNICAL LOSS.

    Who decides what to procure, when to procure and how many
    to procure rest. It is the management. As always, in this decision-making, cost efficiency and cost effectiveness are the primary concerns.

    If the technical losses continue despite the capital equipment acquisition for this purpose, then there something wrong with the operational processess.

    NOW IF YOU TECHies will tell me that we just charge the whole technical loss because it can not be avoided, i will tell you to pack your bags and start climbing Mt. Everest.

    the decision to buy cheaper equipment because the suppliers give commissions to the PD is also a cause of technical loss. it can not be classified under pilferage or theft.

    The procurement of low standard meters is also a cause for technical loss.

    When the management fails to identify where or what point the technical losses occur, what do you call the management?

    so technical losses are not only due to the system design but also to the operational processes which are under the control of the management.

    Parang paggamit ng plantsa. malakas ang kuryente sa plantsa pero kung alam mong ischedule ang pagpapalantsa, makakatipid.

    • cvj on May 28, 2008 at 6:15 am

    NOW IF YOU TECHies will tell me that we just charge the whole technical loss because it can not be avoided, i will tell you to pack your bags and start climbing Mt. Everest. – Ca T

    I hear the same sort of ‘shoot the messenger’ type bravado from management types in the real world. They can replace the ‘techies’ but the physical laws and engineering tradeoffs remain the same.

  5. I wonder if you are in the management level of the organization’s hierarchy because your mentality is that of a techie.

    have you not heard of technical loss reduction program for public utilities?

    Have you not heard of systems appraisal to reduce technical loss conducted by consultants?

    sheesh

    • leytenian on May 28, 2008 at 7:58 am

    Bencard,

    “who authored that legislative shit and how come it has never been questioned all these years”

    The culprit is actually a law enacted by Congress in late 1994, RA 7832, which allows:
    1. private utilities like Meralco to charge up to 9.5% of power losses to custormers
    2. electric cooperatives like Albay Electric to charge up to 14% of power losses to customers.
    this was on manolo’s previous blog “dismal diplomacy”

    here’s what UP N students comment: “What Meralco can expect to get from the Philippines is a function of their contract.”

    A cost-plus contract, more accurately termed a Cost Reimbursement Contract, is a contract framed in such a way that when the contractor finishes the agreed-upon work (which can be delivering a certain amount/volume of of rifles, trucks, or kilowatt-hours), they receive compensation equal to their expenses plus a profit. Cost reimbursement contracts contrast with fixed-price contract, in which the contractor is paid a negotiated amount regardless of incurred expenses.

    Then, there are rate-guarantee contracts. This contract can be for power transmission companies. The transmission-company’s service is to transmit to the consumers (through the company’s power-lines, etcetera) the power which the company buys from “other sources – power-generating companies”.

    In my own opinion, the law was appropriate at that time it was enacted but will no longer apply to our current economy due to increasing high coal price. Not sure what contract Meralco has with Napocor.

    http://en.wikipedia.org/wiki/National_Power_Corporation

  6. Thanks for the link, MLQ3.

    • leytenian on May 28, 2008 at 8:17 am

    “industrial capitalists from the west to increase shareholder value taking advantage of the slave wages from the east”
    If might be true that wages from the east is cheaper but it also take away jobs from the west. it is awin win situation for both east and the west…

    check this link or research outsourcing… http://en.wikipedia.org/wiki/Outsourcing

    Our country has benefited from BPO’s employing our young graduates who can speak english. wondering why koreans are taking english classes in the Philippines? Trust me… their government have seen the potential of outsourcing. We filipinos must compete and attract more on this foreign entities even from small size to medium size businesses. But another downside in our country is charging an upfront fees to these BPO providers thus transferring some of these jobs to India. Even land tenancy contract for thei buildings are being exploited.India is providing incentives by having them build their offices with freeland rent for 5-10 year contract. Can we compete?of course if our leaders understand what employment is all about.

    • leytenian on May 28, 2008 at 8:39 am

    3 years ago, I was making a proposal to a friend who manages one of the biggest BPO providers in cebu.i asked him if he can manage call centers for small and medium size businesses that I can contract with in the State of Florida to start with. He expressed the problems of supply in terms of labor force. Here’s what he told me:

    there are about 110,000 people demand for BPO’s a year. there are about 300,000 graduates a year but only 10% of that can be trained and be employed for these jobs. 10% is only 30,000 supply over the 110,000 demand.

    Another issue, the turnover ratio of this type of employment is high due to stress and family worries that their newly grad children are working at night.

    Not sure what happen now but I took these deals to India and sold the contract to someone else. Small businesses and medium size businesses in the US continue to prefer to pay cheaper labor in terms of customer service.Lots of jobs can be outsourcedfrom the US. Any senator in any region can always attract any of these BPO’s. Provide these foreign inventors with free land tenancy for 5-10 years. If these inventors ( BPO’s) leave the country, the region will benefit from the asset( building) attach to the land. This what India’s strategy. we can do this too or it is a matter of civilized negotiations.

  7. The Cat:”wow a no-brainer solution. this is tantamount to putting the blame of the stupidity and inefficiency of people in the operation to the consumers.

    Ah, so the Cat is now also more technically knowledgeable than all the top engineers of power industry giants Siemens, ABB, Altshom, GE, Schneider Electric, etc., who compete against each other in these substation bids. Especially for Meralco’s (or any other big private-owned projects like SM’s and SMC’s) Primary Substation equipment, technical losses IS a major factor in terms of penalty points, it even goes way back to the design stage. That is the reason not all suppliers with foreign principals are invited since their product lines do not pass the basic hurdle rates related to technical losses. It would also be absurd to conclude, as far as technical losses is concerned, that Meralco personnel are stupid and inefficient. Try to pre-qualify with Meralco, hey even with the corrupt and inefficient Napocor, too.

    “Stupid and inefficient” private corporations do not live over one hundred years and make an awful lot of money. Any hotshot manager knows that…I suppose.

    I don’t blame the Cat for the no-brainer retort. The partial quote by MLQ3 could have reduced my whole blog post as a simpleton’s inexperienced, uneducated rantings.

    Thanks to the ever-prudent cvj, who read the whole thing and understood my point.

    • leytenian on May 28, 2008 at 10:19 am

    tongue: “private corporations do not live over one hundred years and make an awful lot of money. Any hotshot manager knows that…I suppose.”

    very true… i will not invest my money and my skills if ROI is less than 12%. I expect my money to double in at least 5 years. if not, i will venture for another deal.

    let these business people compete. the government’s role is to provide windows of opportunity. if the aboitiz ,alson’s group or alcantara want to open a franchise in the electric business, let them in. ..kung may pera sila to start the infrastructure. matira ang matibay. with 2-3 electric providers, these businesses will compete in terms of pricing and quality of service thus will benefit the consumers. this is really what true free market is all about. our current admin’s strategy is exposing their incompetence to the public instead. they want to manage every sector including commodities. That’s a lot of micromanaging to do in a corrupt government. Napocor should have allocated services according to public bidding in the first place or full disclosures of its intentions. In the meantime, COAL prices will continue to increase in the short term or maybe long term. Future contracts should have been the management’s strategy to fix prices at below market value if data in 2003 was considered. Coal in our country is now bought at the spot price or bought at current market price. who’s job is that?

    • mlq3 on May 28, 2008 at 10:51 am
      Author

    I am not so convinced about the actual competitive spirit of our big businessmen. it seems to me that if you have one biog player and let in two smaller players, for example, all three will find a way to end up cozily co-existing without really vigorously competing, they will form a cartel where there was once a monopoly.

    • leytenian on May 28, 2008 at 11:01 am

    agree with you also manolo but the role of government leaders between the competition is to regulate and provide balance according to the needs of our people. that’s what city and regional maps in our country are for. in sports, there’s always a referee.

    • cvj on May 28, 2008 at 11:04 am

    mlq3, but isn’t that how businessmen have behaved since the time of Adam Smith? The textbook ideal of perfect competition is not viable in a lot of industries. IMHO, nothing wrong in that as long as they produce real value (preferably for export), are regulated and taxed (of their excess profits) by government. Competition is over-rated as a development strategy.

    • leytenian on May 28, 2008 at 11:10 am

    cvg,
    “perfect competition is not viable in a lot of industries”
    agree but for the sake of these aboitiz and alcantara influence… let’s see how our government balance their interest both friendship and business. kailan kaya matapos ang meralco? LOL

    • cvj on May 28, 2008 at 11:14 am

    leytenian, yeah. i believe it’s a tricky balance between spring cleaning and coddling these Oligarchs and everyone has a role to play. Our neighbors (both Communist and Capitalist) have moren or less been able to achieve such balance.

  8. Leytenian,
    A 300MW combined-cycle power plant costing $300M my company, as IPP, was awarded in 1992 was $0.06 per Kilowatthour. CONSUMED, not take-or-pay, no sovereign guarantee, we purchase our own diesel (Unlike many of the other IPP plants whose fuel are supplied by NPC, or the dam whose WATER Napocor pays for for ONE BILLION PESOS a year, napakaswerte!) Our project has a payback period of 15 yrs. The BOT was for 25 years. Witin a few months of Ramos’ new administration in 1992, probably realizing the windfall that would have been made, canceled the contract and replaced it with his own negotiated suppliers. Later, and just before he declared the power crisis solved, he sought congressional emergency power to do away with biddings and more negotiated contracts. (PCIJ has a four-part series on this.)

    Six US cents per kilowatthour, at today’s exchange rate would have translated to only about P2.60 per. Compare that to NPC’s prevailing price of over P5. Almost double.

    And many people are made to believe this is all Meralco’s fault. Well, some “experts” can be gullible, too.

    • hvrds on May 28, 2008 at 11:31 am

    Hindsight is 20/20. Everyone is now waiting for the other shoe to drop to bring things back into equilibrium. Consumption of gasoline in the U.S. is very slowly dropping. The emerging markets are taking up the slack.

    But the price of the differing types of crude oil is still strong. Governments that are import dependent on everything like the Philippines are praying for a substantial correction.

    The BSP is praying hard that the speculators who might be driving the peso weaker versus the dollar would now start to back off. Scenario: At $200 a barrel the OFW edge will disappear and we will be facing a BOP blowout.
    At $150 a barrel things would be tough. The oil retailers are set to increase prices by up to Php 10 just to catch up not counting the recent price increases yet.

    A continuing spike in the price of oil could spell double trouble for the Philippines. Speculators on currencies would see more pressures on the balance of payments for the country not only with high oil prices but we also import finished oil products.

    It is like a giant poker game. The government has to try to hold the line on basic costs but pressures could be building for which no one knows when these pressures will start to subside. All these issues for Meralco, text messaging, rice imports are simple diversions to a very grave problem. Hitler had his Jews and the Communists to pin the blame on Germany’s problems. Now everyone is playing nice with regards to VAT charges and such and such and why it is unfair for the poor.

    There is simply too much cash which have no productive use in the world.

    No one thought that supply and demand would also be part of a world market where one could trade supply and demand in the future.

    But the problem that in the past future prices would be lower but today it is the futures that are pulling up todays prices.

    The uncertainty of future oil supplies are having a growing effect on the prices of everything as demand is exploding in newer markets.

    Case in point: How will private interests put up new power plants to run on natural gas or coal when the price for the fuel is unknown in the future. The cost of putting up a new plant is surely higher now than two or three years ago due to high costs of everything. (Steel, copper, cement, etc.

    Plus you will have populist government that will try to limit the charges of these newer higher costs imported plants.

    We are going to have a lot of populist demagoguery coming from the Palace and Congress.

    • rego on May 28, 2008 at 11:35 am

    “I hear the same sort of ’shoot the messenger’ type bravado from management types in the real world. They can replace the ‘techies’ but the physical laws and engineering tradeoffs remain the same.”
    ———————————————————
    Ayyy ako naman Im tired of this jaded alibis from so so techies. Para sa akin if you a real techies you are supposed to resolve any types of issues. Para ke pa at naturingan kang techie.

    • rego on May 28, 2008 at 11:37 am

    BTW, I believe the Lopezes is a big time failure in this Meralco issues . They should shoudl just tur over the management of Meralco . No ifs and buts.

    • leytenian on May 28, 2008 at 11:40 am

    cvg,
    true, it happens everywhere but i wish they could be more appropriate to the benefits of our people. at least in my side of world and in your side of world, there are less sufferings and rule of law is interpreted according to economic conditions and situations. common and conflict of interests are considered highly unethical and unprofessional. i guess we should just keep praying and hoping until the guava fruit will fall into juan’s face.

  9. I agree with cvj. Honest competition will never be a fruit of a corrupt system, and also that of manolo’s cartel replacing a monopoly.

    Back to pilferage, the cost of a comprehensive monitoring system alone looms over whatever benefits it aims to achieve. The whole systems loss is impossible to segregate into the three accounts EPIRA has set. What’s easy to determine are Meralco’s own consumption, and the power that comes into transmission.

    I read the whole Systems Loss IRR and it is a tight set of rules patterned mainly after the West.

    Suggested reading (sorry, for techies only): http://www.ent.ohiou.edu/~manhire/power/download/dan_suriyamongkol_thesis.pdf

    • magdiwang on May 28, 2008 at 11:45 am

    in today’s China, your description is an incomplete account of what’s happening – a cartoon version that assumes that all foreign investors are evil and that capitalism is evil, which is not necessarily the case. The Philippines and India are also benefiting from these foreign investors via the outsourcing boom. The difference with China is that they are able to attract foreign investment in manufacturing activities as well.

    i did not in anyway alude that capitalism is evil. what im trying to impart is that there was no overiding policy change that china implemented to attract foreign investors. its basically cheap labor, political stability through intimidation and its willingness to look the other way on environmetal concerns that goes along with rapid industrializations. Crispin Beltran will not allow this type of exploitation. he is more a maoist than a deng ideologist.

    In any case, attributing China’s success to foreign investment puts the cart before the horse. China’s economic takeoff which started in 1978 was triggered by growth in domestic businesses i.e. farmers selling their surplus (over and above their production quota), township-village enterprises (joint ventures between local government and local entrepreneurs) and special economic zones. Once the foreign investors saw the potential, then they came in.

    When you have china’s equity markets falling more than the DOW the last eight months and the US is the one on the verge of recession, it tells a lot on its economic power when push comes to shove.

    It also ignores the groundwork that was laid by Mao’s revolution in 1949, i.e. kicking out China’s Oligarchs and addressing the problem of inequality which paved the way for the effective implementation of Deng’s reforms in 1978.

    the disparity in wealth today’s china and during mao’s time is more acute. while the cities and coastal areas have greatly benefitted, the inland rural areas are stuck in a time warp with their income many times lower from their city dwellers.

    • hvrds on May 28, 2008 at 11:48 am

    “A 300MW combined-cycle power plant costing $300M my company, as IPP, was awarded in 1992 was $0.06 per Kilowatthour. CONSUMED, not take-or-pay, no sovereign guarantee, we purchase our own diesel (Unlike many of the other IPP plants whose fuel are supplied by NPC, or the dam whose WATER Napocor pays for for ONE BILLION PESOS a year, napakaswerte!) Our project has a payback period of 15 yrs. The BOT was for 25 years. Witin a few months of Ramos’ new administration in 1992, probably realizing the windfall that would have been made, canceled the contract and replaced it with his own negotiated suppliers. Later, and just before he declared the power crisis solved, he sought congressional emergency power to do away with biddings and more negotiated contracts. (PCIJ has a four-part series on this.)”

    “Six US cents per kilowatthour, at today’s exchange rate would have translated to only about P2.60 per. Compare that to NPC’s prevailing price of over P5. Almost double.”

    “And many people are made to believe this is all Meralco’s fault. Well, some “experts” can be gullible, too.” pundit blogger

    $300 M in 1992 was based on approximately Php 24-25 – $1. No idea what the cost of diesel was then in 1992.

    In 1997-98 the peso equivalent of that investment doubled to Php 50-1. That means the imported diesel also would be bought at Php50 to $1.

    All electric bills are charged in peso denominations.

    The investor of that proposed 300M plant could not possibly maintain the same selling price. They would have gotten killed. The entire reality of the exchange rate changed their initial assumptions.

    To entice investors in IPP’s the government repealed the uniform currency law and the government agreed to denominate all purchases from IPP’s in dollars with take or pay provisions. How do you like them apples guys?????

    Any smart person who can go back with the exchange rates and cost in dollars and pesos of plant costs, fuel and KW/hr charged will see the relationship of these variables.

    That is the fundamental problem.

    • leytenian on May 28, 2008 at 11:50 am

    TonGuE-tWisTeD :

    o sige… mag open ka na diyan.. pagod na ako.. LOL. anyway… how does your power plant conform with global warming regulations? if it’s good to go. bahala na basta hindi mahal. whatever is best for the people and you will be employing people …walang corruption ha… LOL

    • kg on May 28, 2008 at 11:53 am

    ” that’s what city and regional maps in our country are for. in sports, there’s always a referee.”

    Once you begin suggesting the use or sense of being of a particular anything,you begin to confuse me.

    you said once “that is what is opec for”, concerning oil prices,while we know it is beyond that.

    again you also said that “that is what apec is for”….for middle eastern counties?

    lalo na yung “that is what is insurance “for calamities like tsunamis and dinagdagan mo pa that hospitals should be trained for calamities.

    going back to your point, what can regional and city maps do in terms of competition. spread it out to isolate one, even then, where would the competion be?

    about return beyond five or else look for another is purely for school environment. Sa totoong buhay you have to risk more than that.

    • kg on May 28, 2008 at 11:58 am

    So winston will go to the courts.he lost the board room battle so from corporate drama to another one of those court room drama.

    I still refer the gov the wwe creative team for them to generate heat.

    so wg is not the carl icahn of the philippines,afterall. Although, Icahn also failed on his raid attempt of yahoo via the proxy votes.maybe they are soulmates.

    • vic on May 28, 2008 at 12:00 pm

    TECHNICAL LOSSES
    Technical losses on distribution systems are primarily due to heat dissipation resulting from current passing through conductors and from magnetic losses in transformers.
    Losses are inherent to the distribution of electricity and cannot be eliminated.

    Hydro One issued a Request for Proposals (RFP) to carry out an independent assessment of technical losses on Hydro One’s distribution system. The work was awarded to Kinectrics Inc., a leading authority on distribution systems and distribution losses in particular.

    The report prepared by Kinectrics and entitled “2007 Recalculation of Distribution System Energy Losses at Hydro One” is presented in Appendix A of this Exhibit ;

    (Note: Back in 2004 the Energy Board approved the charge 9.2 % system loss on the billings after a Public Hearing, but now the Generator (power provider) charging a Flat rate of 5 cents and 5.9 cents after the established threshold of 600 for 6 summer months and 1000 kWh during the 6 winter months when nighttime longer and demands are stronger.

    These charges are collected by local distributors without Markups for the Provider. Local distributors charge separate for delivery of Electricity.

    Business and high volume users (more 250 thouskWh) are billed differently…

    Table 2: Hydro One Losses Estimate by Equipment*

    Component Estimated Loss as a
    Percent of Energy Sold
    Subtransmission lines 2.24
    LV Distribution station transformers no load 0.21
    LV Distribution station transformers load 0.19
    Distribution lines 1.49
    Distribution line transformers no load 0.78
    Distribution line transformers load 0.16
    Secondary lines 0.19

    Total 5.26

    The detailed reports of the Kinectrics can be viewed on this site:

    http://www.hydroonenetworks.com/en/regulatory/2008_distribution_rate_application/Dx_Rate_Filing/Exhibit_A_Administration/Tab_15_Schedule_3_Distribution_Line_Losses_Study.pdf

    • leytenian on May 28, 2008 at 12:12 pm

    kg,
    just get the point i made if there’s one for you and ignore the ones that you think do not make sense. ikaw ha… LOL. wag mo akong awayin… babae ako. that’s my defense. biro lang. bahala ka na.

    • cvj on May 28, 2008 at 12:17 pm

    i did not in anyway alude that capitalism is evil. what im trying to impart is that there was no overiding policy change that china implemented to attract foreign investors. its basically cheap labor, political stability through intimidation and its willingness to look the other way on environmetal concerns that goes along with rapid industrializations. – magdiwang

    If that was the case, then even Burma would be an economic miracle. As mentioned here, China had a lot of policy innovations:

    rodrik.typepad.com/dani_rodriks_weblog/2008/05/re-uniting-development-economics.html

    Case in point: the greatest development success of our time, China. As I review and document in my paper, the experimentalist mind set was deeply ingrained in China’s approach to reform. Some of the experiments that proved extremely successful were: the household responsibility system, dual-track pricing, township-and-village enterprises, and special economic zones. – Dani Rodrik, Re-uniting development economics

    Of course China also had failed experiments of Great Leap Forward and the Cultural Revolution which we can choose not to repeat.

    Crispin Beltran will not allow this type of exploitation. he is more a maoist than a deng ideologist. – Magdiwang

    As i previously mentioned, economic takeoff by our neighbors (Communist and Capitalist) required addressing the problem of inequality (especially in land). What made Deng’s reforms possible was Mao’s revolution. It cleared the decks of Oligarchs. Crispin Beltran would have been useful in this regard.

  10. hvrds,
    Power plants are still priced the same worldwide, except here, of course, where such a plant would now fetch $480M (based on Masinloc) even with Napocor supplying fuels bought at spot and not from long term-purchase contracts which we were hedging on. That’s about P7.00 at the pump then, compared to about P46.00 today.

    Hopewell was building theirs at the same time in Navotas then Pagbilao and Calaca 1 & 2, they sold to Southern Energy which sold to Mirant which sold to… Each one was profitable. Each time, Napocor and government “assisted” the incoming investors.

    We would have accelerated payback and survived this oil crisis even if prices shot up to a brutal $300/barrel. We could sell the plant that had limited RORB margins anyway and still make a profit based on “Philippine Pricing” and use the oil contract for bigger income.

    How’s that for apples?

    • Jeg on May 28, 2008 at 12:30 pm

    It’s a fight between two enemies of free trade: government and big business. Given a choice between the two, I’d tend to side with the one who doesnt have an army. (Doesnt mean Im rooting for big business, you understand. To quote manuelbuencamino: Hitler first, Stalin later.)

    • hvrds on May 28, 2008 at 12:40 pm

    Question remains that if you would have had no guarantees from government for forex loses and no take or pay provision you guys would have sold out to one that had that provision as Hopewell did. But the entire premise of your thesis is that you would have been able to sell electricity for Php 2.60 using your assumptions in 1992. How could you sell out at a profit when Hopewell was rescued since it had a contract with Becthel that came with a U.S. Export and Import bank guarantee.

    All major power plants come with that provision. Equipment from Japan carries with it JBIC guanrantees and from the U.S. with Becthel as contractor for building the plant the same guarantees. No one takes a risk as big as power plants without this sort of guarantee.

    Now to the point in this whole exercise. Based on the assumptions of 1992 by 1997 the basis was shot to hell. If you want to fast track the depreciation you would have to reflect a more expensive selling price for power in peso terms.

    But then you would also have to get permission for rapid depreciation from the BIR as this is covered by tax laws.

    So the point remains it would have been impossible to maintain a selling price of Php 2.60 post 1997.

    You are no longer selling apples. Naging santol na…

  11. Thanks for the info, vic. Canada does not have the same overheating problems our systems here are constantly subjected to. Transformers here operate with fans and cooling fins. Without need for forced cooling, your system has comparable savings in that aspect.

    But even then it’s 9.2% in Canada and 9.5% in Manila. The difference is negligible. I’d dare assume Hydro One is efficiently managed. At 5.26% technical, the 3.96% could have been allowed for administrative AND pilferages.

  12. That’s it, sell the plant on new prices and the attractive oil contract!

    About $180M profit for the plant and 6-fold profit on oil up to 2018! (Minus whatever accounting adjustments)

    Not bad for a $300M initial investment financed by Canadians.

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