11 June 2018
III. The vision and mission of the ERC are actually simple.
The vision is for the Assurance of adequate supply of electricity, entry of the private sector, and the assurance of fair and reasonable rates.
The missions are to open the sector to true competition as a way to encourage investments and achieve least cost power for the consumers.
Actually being a Good ERC Commissioner should not be that complicated. It should not take lawyers and scientists to take these simple vision and mission to heart and make them their guiding stars.
IV. Lost in Translation….and Implementation
When I was a volunteer technical analyst for one of the key framers of the Epira Law from 1998 to 2002, poring over volumes of position papers from regulatory foreign consultants from the USA, England, and Australia, I picked up one truism from a USA regulator. “we know we wanted to deregulate, we just forgot why”.
I thought at that time it was cute. Just did not realize that it will be so true on many people who will be implementing the Epira Law.
It is in the implementation that we forgot the why of the Epira Law. As an institution with such mandate that will define the power sector that is vital to the country’s industrial competitiveness, to our quality of life, and to our cost of living, the ERC lost its way and soul after the first Chairman, a lawyer but non-politician, was replaced by a succession of politician-lawyers.
To start with, the Epira Law was set up to be circumvented with the influential lobbyists inserting ambiguities and watering down many provisions on cross-ownership, competition, anti-monopoly, rate setting. Even the privatization of NPC assets was set up that early to be corralled by them at bargain prices. One group tried hard to marginalize the electric coops evidently to make them easier to take over as they have been trying to do for years.
How did the ERC end up with so much responsibilities and power under the Epira Law? The common answer was that the Bicam framers of the law did not trust the DOE. To this observer though, looking at the exchanges of drafts and counter drafts in the Bicam, I believe the key Senators were more inclined to concentrate the power in the ERC as the regulator because It is obvious their patrons want to retain their influence in the implementation of the new law, and the proven way to do that is through the regulator, the ERC as they did in the old ERB.
The succession of lawyers Chairman seemed more interested in “outsmarting” the law, stretching the boundaries of logic and patriotism, and forgetting one thing sacred that is even higher than the Epira Law which is basic protection of the public interest.
To them it seems the implementation of the Epira Law was a game. Being lawyers, they seem to have felt so powerful in interpreting (and selectively implementing) the law the way they want. And as politicians, it appeared making deals in writing rules that accommodate their friends and still be technically within the language of the law was the big game and feeling of empowerment. One Chairman gave most of what Meralco wanted and resigned after to run for Congress but lost despite his campaign war chest. By the way, his implementation of the Epira Law caused a P2 per kwh jump in Meralco’s rate that up to now we have not recovered.
In the last four years one let down for the consumers is the new Commissioners demonstrated no interest in recognizing the anti-consumer nature of the rules and showed much less interest in changing them. Is it professional courtesy to the previous Commissioners? How about the consumers and country?
A big part of what’s wrong with the ERC is its adoption of strictly judicial processes that prevents legitimate concerns of consumers from being duly heard. The judicial system of ERC seemed designed to stifle consumer views and favor the moneyed applicants specially private distribution utilities whose battery of highly paid lawyers are charged to the consumers as part of their “regulatory compliance” budget approved by the ERC.
The problem with the current strictly judicial processes is that it had not actually resulted to fair and balance decisions at the ERC especially when it comes to rates and rate setting rules. Not many people know that private distribution utilities are effectively no longer regulated so they can make unlimited profits. And not many realize that we have breached the power generation limits aimed by the Epira Law and that there is now a cartelization.
This bias for the judicial system is a serious concern now that it seems most of the incoming new commissioners to replace the retiring ones are reportedly lawyers. The legalese problem will continue and can worsen.
V. Inter-Disciplinary Challenges at the ERC
It is true that as a quasi-judicial body, the ERC needs one or two lawyers as commissioners. But the ERC also needs knowledgeable members in project finance and in power generation and distribution. They need veteran electrical engineers.
If you are a new ERC Commissioner, you are of course given briefings on how things work within the Commission. So you learn and are made to accept that the methodologies that are in place are the right way of implementing the law, including all the anti-consumer provisions and eschewed processes. The details of 100’s of applications are so much that it will take you about a year to even start wondering (from your conscience) why things are that way. Why specific provisions of the Epira Law are not being implemented and why public interest is not being protected. You are thrown to the trees before you can see the forest.
Of course one thing you are pre-conditioned is that the ERC Commission is a collegial body. To belong, a new Commissioner has to play ball and be one of the boys. Commissioners are known to have heated disagreements. The way some of them roll their eyes when one of them is clearly favoring some applicants.
Most of the appointees to the Commission are actually highly intelligent. However, the learning curve is long for a lawyer to understand the inner workings of power generation, the intricacies of project finance upon which their rate setting is based, the ground level challenges of power distribution in the islands. CPA’s might be able to pick up the WACC concepts but they too will take time to learn the technical. It appears it is not emphasized to them ERC’s mandate to protect the public interest. While they are learning, they are subject to manipulation of the more senior commissioners or senior directors. The dragon establishment is just too big.
VI. Creating a Good Commission
The Epira Law made an effort to attract good talent by providing attractive salaries and retirement packages by providing in Section 39
“The Chairman and members of the Commission shall initially be entitled to the same salaries, allowances and benefits as those of the Presiding Justice and Associate Justices of the Supreme Court, respectively. The Chairman and the members of the Commission shall, upon completion of their term or upon becoming eligible for retirement under existing laws, be entitled to the same retirement benefits and the privileges provided for the Presiding Justice and Associate Justices of the Supreme Court, respectively. “ That means attractive and set for life pensions in the millions a year.
- Choice of Commissioners
The credentials established by the Epira Law are only the start. To create a good commission that can balance the interest of stakeholders and the consumers and the country’s hope for industrial competitiveness, the process of choosing Commissioners and the expertise mix need to be made more objective and multi-sectoral. Even more important is the judiciousness of the appointing authority, the President of the country.
Is it possible to be conflict of interest sensitive? To aim for independent thinking professionals who are not sponsored by and beholden to the big players? Many of us are Christians, proud Filipinos and highly patriotic. But if we owe our appointment to a vested interest, we are already compromised and surely will not be independent.
- Presidential Mandate
As important as His choice, is the mandate that he gives to his appointees. The power sector is so important to the country and people that the President of the country needs to provide a clear direction that hopefully will be in synch with his general objectives for the Filipinos. We cannot aim growth, employment, and economic development if our power supply and services are manipulated and overpriced.
The needed systemic and structural reforms at ERC can only happen if the President champions it. Unless we get lucky and the appointed Chairman recognize these problems and takes it upon himself to lead the reforms. It should not really take long to figure out what needs to be reformed. The Epira law provides the main mandates. Just add a true care for public interest, a good heart and spirit, and we are in business.
- Structural Reforms at ERC
Perhaps the Commission can be restructured for disciplinary specialization. Regulated (transmission and distribution) from Deregulated Sectors (generation and csp), Missionary areas and subsidies. Power Generation. Competitive markets. Disputes. Consumer Concerns. This will allow for efficiency and a shorter learning curve for Commissioners because they can focus initially in certain areas.
The ERC needs a stronger and professional bureaucracy. Career people who will be loyal to the Commissions mandate under the law. People who will dedicate themselves to the pursuit of the ERC’s vision and mission and to the protection of public interest. The Epira law provided for their trainings and for their competitive and proper compensation. They are the ones who can help Commissioners shorten their learning curves. The ones who can make the Commission function continuously in the service of our people.
The equally important structural reform is streamlining the ERC. For the Law to lighten its load. For it to not to regulate what should not be regulated and vice versa. For it to be less judicial resulting to time wasting postponements and the denial of consumers viewpoints from being heard.
People expect that there will be major changes in the make up of the Commission. Some are retiring and some are resigning it is reported. We feel bad for these good professional people. The fire breathing dragon turned out too big for them. Or were they just swallowed by the system?Coming from its recent turmoil, it will be an opportunity for the country to rethink and review the methodologies and processes.
This time let us hope we will be more loyal to the vision of the ERC Commission as defined by the Epira Law. Let us undo the mistakes of the early years and be better guided for the future.
Let us now choose new Commissioners carefully. We cannot afford another 10 years of overpriced and exploitive electricity.
Electric consumers are Filipinos too.
MatuwidnaSingilsaKuryente Consumer Alliance Inc.