The Kind of ERC the Country Needs

Part 1

David Celestra Tan, MSK

5 May 2017

If there is a silver lining in what is going on at the Commissioners level at the Energy Regulatory Commission, it is that this is an opportunity towards finally righting the regulatory course for this very critical government agency that has been adrift in the sea of confused identity and foggy purpose.

If we use Sections 41 and 43 of the Epira Law that created it as scorecards, the ERC would score a 65% at best.

President Duterte’s decision on ERC Chair Salazar is a big step forward that we hope will finally lead to the long needed remake of the regulatory agency.

First A Background on how we Got here

16 years after its creation under the Epira Law of 2001, the regulatory agency had not found its regulatory soul.  Its best Chair was the first one, Atty. Fe Barin,  who was ignominiously promoted to the Monetary Board and later as SEC Chair reportedly because the vested interests (the same people who lobbied for the loopholes in the Epira Law) “could not work with her”.  The President then appointed a “trapo”politician who promptly gave everything the distribution utilities wanted and saw rates soaring including the reviled PPA (purchased power adjustment, remember?). He resigned and ran for Congress but lost.  He was replaced by another “trapo” politician and when his term expired he was replaced by another politician. And the rest is history.

If there is anything we can say about the travails of the supposedly non-politician JV Salazar (although we heard he is an election lawyer), it is that it was a letdown because we the consumers had hoped so much from him. After all, the resigned DOE Secretary Carlos Jericho Petillascreened and vouched for him.

To be fair, the ERC suffered from the sheer magnitude of responsibility dumped on it by the Epira Law. Anything that the bi-cam framers of the Epira Law could not resolve, or did not want to give to their distrusted DOE, they gave to the ERC.  That was the official line. Insiders said the real reason was the powerful lobbyists wanted to keep the rules and implementation concentrated in the regulatory agency, which they historically had been able to “capture” under its predecessor ERB.

ERC was observed to release rulings on very complex Meralco issues but take very long to rule on simple methodologies for electric cooperatives just like the old ERB.   We recall an incident when the ERB was criticized on one ruling, the Chairman had the temerity to fax her reply from Meralco offices. (Yes Junior, we use fax at that time not email!)

The ERC could have used the steady and incorruptible guiding hands of Fe Barin in its formative years when it could have defined its regulatory soul.  But the appointing authority gave it a succession of leaderships that were too susceptible to the enticing lobbying of the vested interests.  Being Commissioners and being its chair is so powerful that absolute power had intoxicated. The ERC lost its way.

MSK refers to them as the old ERC.  The current crop of Commissioners are upgrades from the previous ones.  Former President Noynoy Aquino has political detractors but in our book one of the best things he did for the power sector was appointing  two very capable and morally upright Commissioners in Gloria Victoria YapTaruc and Alfredo Non, absolute professionals with high levels of integrity. Commissioner Josefina Magpale-Asirit brought valuable insights from her previous stint at the Department of Energy. Commissioner Geronimo Sta. Ana was a long time official of the Cebu Chamber of Commerce and brought business sector insights to the regulatory agency. Although his appointment causedan uproar because he was supposedly a recommendee of a vested interest group as exposed by another vested interest.

The old ERC similarly had some good commissioners and line officials but the caliber and moral compass of the Chairman (and his Executive Director) defined where they were going as an institution.  And they went lower than purgatory with patronage and misguided regulation.

Sadly, the ERC has many professionals in its ranks that are committed to public service as exemplified by the late Atty. Jun Villa.

In the new ERC, the conflict at the Commission levelstemmed from the reported dictatorial tendencies of the new Chairman which did not sit well with the other commissioners who understandably invoked that the Commission is a consensual body.  There is normally a reason why someone wanted to be dictatorial.

The problem with the New ERC thoughis that they were only implementing the rules and methodologies that they inherited without revisiting whether they are anti-consumer or if they are contrary to the ERC’s own mandate to prevent monopoly, anti-competitive behavior, abuse of market power, and cartelization. Perhaps the ERC have been overwhelmed by the weight of the responsibility and just the sheer volume of work and contentious issues from 15 private DU’s 119 electric coops, 100 or so private power generators, the PSALM, NPC, and NGCP.

Your consumer organization MSK thanks Commissioner Geronimo Sta. Ana for responding to the petition of MSK when he was OIC last December 2016, for a review of the Performance Based Rate making rules (PBR) which had been unacted by the ERC for about a year. We believe PBR has been causing P10 to P15 billion a year in undeserved profits to the DU’s.

The consequence is here we are 16 years later and we have the highest electricity rates in the Asean and our country is not anywhere near the global competitiveness that the Epira Law aspired for. Cross ownership between the distribution sector and generation sector is pervasive and monopolization and rate overcharging is prevalent.  A lot of it caused by the loopholes in the law and its IRR and ERC’s failure to truly regulate and protect the public interest.

 The Epira Law of 2001 envisioned the ERC Commissioners to be incorruptible which is the reason the law provided for a generous safety net of retirement at the level of Supreme Court justices and the security of a tenure.

 Let us hope that President Duterte would cause a leadership reform in the ERC that would be committed to enlightened and incorruptible regulation that balances, efficiently and timely, the interest of power service providers like the DU’s and generators and the need of the consumers to be safeguarded from the profit optimization maneuvers of these private business.

 Reforming the ERC is a national emergency.


Next: Creating the Kind of ERC the Country Needs

MatuwidnaSingilsaKuryente Consumer Alliance Inc.


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