Unpaid debt of PSALM - Part 1

March 20, 2020 at 02:20 am by Rod Kapunan
https://manilastandard.net/opinion/columns/backbencher-by-rod-kapunan/320047/unpaid-debt-of-psalm-part-1.html

The installation of the Cory Aquino regime was ominous, for rightly, she appointed Filipinos to run the industry who openly exhibited their fealty to their imperialist brokers. Cesar Buenaventura who once served as president of the Ayala-owned Pilipinas Shell Corporation was appointed to replace Geronimo Velasco whose department was immediately abolished by the vindictive but devoutly Catholic Cory Aquino.

Immediately after Edsa, Cory, at the behest of her implanted foreign economic hitmen, issued Executive Oder No. 20 on June 19, 1986 placing the offices, agencies and corporations attached to the Ministry of Energy under the administrative supervision of the Office of the President. This was followed by E.O. No. 55 on October 1, 1986, transferring the country’s nuclear power plant, equipment, materials, facilities, records and uranium fuel, and to assume the remaining loan obligation of the National Power Corp. to foreign lenders guaranteed by the Republic, and E.O. No. 98 modifying E.O. No. 55.

In the blink of an eye, the three executive orders flushed to the septic tank the almost-finished Bataan Nuclear Power Plant (BNOO), thereby forfeiting the 621 megawatts but leaving the burden to our people to pay the $2.3 billion that ballooned from an original cost of $600 million in 1977. For all their insistence to redesign the plant and assure “safety,” Cory dropped the BNPP like a hot potato. Many suspect she connived with her foreign brokers not to demand rescission or for that would be incongruent to any possible claim for damages. Just like her decision to hand over Meralco to the Lopezes for a song, she and her cabal of hypocrites practically allowed the government to be swindled a whopping amount of $2.3 billion.

The reorganization of the oil industry was most telling. The circumvention of the 1973 and 1987 constitutions which accorded the Philippine government the preferential advantage of 60-40 sharing in all energy-producing minerals under the updated Service Contract enunciated by P.D. No. 87 was set aside. Cory revived the discredited “concession system” given by the DENR, similar to the grant of concession to mining companies.

The shelving of the BNPP resulted in Napocor incurring huge financial deficit running to more than a trillion pesos which it failed to collect from the expected income that will be generated by the operation of the plant. This was complicated by her issuance of E.O. No. 215 which allowed the private sector to generate its own electricity. As usual, the executive order promised to bring down the price of electricity, unmindful that as private investors, their concern was to protect their profit and investment.

The deregulation of the power generation industry was the first symptom felt by the decision to mothball the BNPP. This led to the chopping of Napocor, and selling them to willing buyers. The shortage in energy was serious that palliative measures have to be taken. The oligarchy was determined to destroy the whole infrastructure of our energy industry. Meralco was allowed to enter the wholesale electricity market by building their own generation plants to be sold directly to its captive market within their respective franchise area. They did not only compete with Napocor but resorted to undercutting their price that led to Napocor sinking deeper into debt.

Aside from destroying the supply side principle adopted by Napocor, the hypocritical oligarchy approved the Clean Air Act. They talked much about the environment and fear of climate change but refused to discuss whether the venture would be affordable to our consumers. Unknown to many, the decision to give up the coal industry resulted in the laying off of thousands workers dependent on it. The shift was premeditated because the costly natural gas had to replace many existing diesel-powered plants operated by the Lopez-owned First Gen. They wanted to make sure that natural gas would have ready buyers for their newly built gas-powered Santa Rita and San Lorenzo Ruiz power plants.

The completion in our payment for the mothballed BNPP in 2015 did not provide the financial relief we thought. The oligarchy wanted to make sure Napocor would forever be rendering debt service. That way, the country would be dependent for its energy requirements at whatever cost. Remember, it was this handful group of oligarchs that demanded guaranty to their investment, and the surest way is to pass a law deregulating the price of oil. Aramco demanded the deregulation of fuel products as pre-condition to its acquisition of Petron in 1994 but only to be sold to another buyer at a higher price.

On February 10, 1998 R.A. No. 8479 or An Act Deregulating the Downstream Oil Industry was passed. Despite that and the grant of tax exemption on imports of crude oil, the cost of electricity remained high. To ease the problem, it approved R.A. 7648 on April 5, 1993 prescribing urgent measures necessary to effectively address the electric power crisis. Shortage in power supply remains acute. The Ramos administration entered into contract with the independent power producers (IPP). Power plant operators were given guaranty by Napocor to purchase from 75 to 80 percent of their production over the next 10 to 20 years.

Instead of helping ease the shortage, power plant operators made a killing because the government was purchasing power in excess of what the consumers need at 20 to 40 centavos higher than the cost of the NPC-generated power. Napocor which stands as a buyer incurred heavy financial losses thus burying the power agency deeper in debt. These, in turn, were charged to the consumers though the purchase power agreement (PPA). So, the hoot about the PPA as savior to our power shortage turned out to be a complete dud.

The approval of R.A. No. 7648 allowed both the power generation plant and distribution utilities to increase their rates. To find justification for this, the Energy Regulatory Commission (ERC) discarded the old method of granting rate increase used on the simplified “performance rate base.” The purpose is to allegedly reduce the negative impact of information asymmetries and to motivate regulated companies to reduce their costs to increase profit. This is done by setting a cap on prices on revenues. Even Napocor was accorded subsidy by PAGCOR of 10 percent of its annual aggregate gross earnings for the next five years: Provided, that such allocation shall be based on gross revenue after deducting the 5 percent franchise tax and the 20 percent income share of the National Government.