New ERC Chairman is an Upgrade. He Deserves a Chance

by David Celestra Tan, MSK

Weeks before he was officially appointed by President Pnoy as ERC Chairman to replace ex-Pampanga Congresswoman Zenaida C. Ducut, lawyer Jose Vicente Salazar was already being questioned for his lack of energy industry knowledge and therefore will be needing a “long learning curve”. He allegedly worked as a consultant for the Aboitiz group. It was implied also that he was involved in some kind of irregularity at the Department of Justice.

Well, allow us to express our take on how this appointment could affect the power industry and the consumers, especially those in the Meralco area.

From news accounts, the new ERC Chairman has an electrical engineering degree from UP and a lawyer. He also has a Masters Degree in Public Administration from Harvard University. More important to MSK, It appears he is not a politician for a change.

Wow. What an upgrade from the previous appointees. For that matter the current composition of the ERC Commission as a whole is an upgrade from the class of 2002 to 2014 of PGMA appointees. Nothing personal, but the consumers did terribly under those commissioners as they gave in to most of what Meralco wanted to change in our rate making methodologies. Somehow the three politician Chairs of ERC under PGMA appeared to have mindsets that did not translate to “consumer first” regulation and the “public interest” mandate of the ERC.

On top of his educational credentials, the new ERC Chair apparently had served on the board of PSALM and represented the DOJ on energy related tasks. We expect he is also a Meralco consumer, probably an important real life experience needed by him to have the right perspective. We mean this guy is not clueless as being implied by early detractors and should not need to struggle through a “long learning curve” in the critical issues facing the ERC, the RCOA and RES rules included.

Part of that is the solid group of Commissioners that is already in place.

It is political season and it is no longer in vogue to heap praises on President PNoy but credit must be given where it is due. In our book one of the best things President Pnoy quietly had done was putting in better people at the ERC. The appointment of Commissioners Non and Taruc, which ironically went unnoticed by the media, was a stroke of genius, a great patriotic step towards infusing a regulatory soul into an agency that had lost its way, and a big testimony of this President’s commitment for going “matuwid” in governance. The subsequent appointment of ex DOE undersecretary Josefina Magpale-Asirit was similarly an upgrade in industry knowledge. She brought in energy policy making perspective into the ERC.

“Long Learning Curve”

We doubt that “long learning curve” will be a problem. ERC Chair Salazar is not exactly clueless. And the concept of knowing energy and having a “short learning curve” is overrated. We mean, former ERC Chair Ducut had a term of seven (7) years. Granting that she spent two years “learning” the power sector, we can assume that she can already be considered knowledgeable in power deregulation in the last five (5) years until her recent retirement. But how did the consumers do in those last five years? Dismally. There was no initiative to correct the anti-consumer regulatory rules put in by her two predecessors since 2002. It was perpetuation. Remember the Meralco rate infamy of 2013 when the Ducut ERC approved in one sitting the application of Meralco to pass on to the consumers an 80% jump in generation rates? We mean under Ducut, ERC’s conscience was not even bothered enough to take pause and ask “wait a minute, isn’t a P4.15 per kwh increase in one month too big a burden to the consumers?”

On the issue of RCOA and RES, we heard Commissioner Non is currently leading the initiative to rewrite the rules to create more competition and avoid conflict of interests that work against the consumers. It is in good hands and the ERC should be allowed to stay the course.

What new ERC Chair Salazar needs to do a good job at ERC is to have his heart in the right place. To sincerely and faithfully pursue “fair and reasonable” rates, to recognize that the promotion of true competition in the power sector is what will bring down rates, to see that opening the generation market is key to assuring continued investments for long term power supply, to balance the right of power sector investors to a fair return without sacrificing the consumers. Chair Salazar has to discern all decisions at hand from the prism of public interest. “It is only through the heart that one can see rightly” as the Little Prince said. If he is faithful to these ideals he will not be swayed, he will not be enticed, and he will not be lost.

The ERC bureaucracy also has professionals who are competent and committed to promote public interest. They just need to be led along the matuwid path towards the genuine pursuit of ERC’s regulatory mandate for fair and reasonable rates and the needed creation of a truly competitive industry environment.

ERC as “Quasi Judicial” body

One important thing ERC Chair Salazar should bring to the ERC is a fresh look at things. At the way things are done. We need new approaches.

One area that can use some rethinking and better enlightenment is how it handles its “quasi judicial” powers. The GMA ERC’s got caught too much in their “judicial” power. They operated as a court of justice, only hearing arguments and making decisions based on evidence presented. The Energy Regulatory Commission should be a provider (or enabler) of strategic energy policy decisions by sending the right “rate making methodologies” to support those goals. It is too reactive and apparently lacked its own competitive power road map. In the process it made itself susceptible to the enticements of the vested interests and hence easily got distracted. Napariwara ang Bayan. The steadfast initiatives of the team of Commissioners Non, Taruc, and Asirit to promote true competition is a new dawn in the agency long felt to be apathetic to consumer interest (although you hear them use the term in vain).

The ERC can also rethink and streamline its own regulatory coverage. Why is it necessary for it to approve rate reductions as an example? If Chair Salazar can adjust this judiciary attitude, the consumers can see much better regulatory rules that better safeguard them, an ERC that applies its regulatory power and resources on things that need regulating.

As pointed out by former Energy Secretary Carlos Jericho Petilla, Commissioner Asirit suffers from the perception that she is a niece of the powerful Rene Almendras who is a known Aboitiz man. Newly appointed Commissioner Geronimo Sta. Ana of Cebu is also reportedly a former Aboitiz executive just like Sec. Almendras. And new ERC Chair Salazar had reportedly served as a consultant of the Aboitiz group.

Unfortunately the Aboitiz group is currently appealing a finding that it manipulated the spot market and is being penalized by P200 million by the ERC. We understand the matter is already with the higher courts. We agree that this is not an ideal situation. But is the glass half empty or half full? How can anyone have deep knowledge of the energy sector, especially power, without having been involved with any of the players in some capacity? Professionals do have rights to practice their professions. What they cannot have is conflict of interest that cannot be shed, like being a family member.

The MSK as an advocacy group in the Meralco area still see the new PNoy ERC as a significant upgrade for the consumers. We will trade anytime an ERC that is unabashedly captured by Meralco that serves 62% of the country for a new ERC that is captured (granting) by the Aboitiz group that serves only 14%.

Let us give new ERC Chairman Jose Vicente Salaz+ar a chance to show that he can put the interest of the Filipino nation first and work for the ERC’s mandate to protect the public interest. It should not take him long to find his heart for the consumers.

The electricity consumers are counting on you Chairman Salazar. Please don’t let them down.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

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