Consumer protection vs regulatory capture

By BusinessMirror Editorial – January 15, 2018

Last December the Office of the Ombudsman ordered the one-year suspension of four commissioners of the Energy Regulatory Commission (ERC) for, among other offenses, failing to implement the government’s policy against anticompetitive behavior in the electricity market.

Deputy Ombudsman for Luzon Gerald Mosquera wrote the decision. In a separate yet related order, he also recommended the criminal prosecution of the four erring commissioners, Gloria Victoria Yap-Taruc, Alfredo Non, Josefina Patricia Magpale-Asirit and Geronimo Sta. Ana, together with dismissed ERC Chairman Jose Vicente Salazar. (As he can no longer be suspended following his ouster, Salazar was ordered to pay a fine equivalent to six months of his salary.)

Mosquera’s orders, released on December 11, 2017, sends a strong, scathing message against regulatory capture, a type of government failure where a regulator fails to protect the interests of the consumers and the public and, instead, supports the behavior of the firms and the industry it is supposed to regulate.

The suspension basically covers the entire ERC board except its chairman, Agnes Devanadera, who was not included in the Ombudsman’s censure, since she had only been appointed by President Duterte last November.

With said suspension and possible criminal prosecution, the Ombudsman is essentially telling the ERC board: Do not be a rubber-stamp body for the industry you are supposed to regulate.

We do agree. While the country needs more power plants to supply electricity to a rapidly developing economy, all energy contracts and infrastructure must be made in a transparent and accountable process.

It is the ERC’s duty to stop the monopolistic schemes of power players and big business groups that lead to self-dealing contracts; or, in Sen. Ralph G. Recto’s words, “to be the ombudsman and anti-cartel police of the power industry.”

The Ombudsman has, in effect, castigated the ERC for failing to be that power- industry ombudsman.

The penalized ERC officials who composed the agency’s five-man en banc body had been setting the stage to approve power-supply agreement (PSA) applications that they earlier accepted under questionable circumstances, in violation of the ERC’s own competitive selection process (CSP), the Ombudsman’s decision said.

According to Mosquera’s orders, the ERC executives should not have accepted the PSAs, unless they undergo a CSP.

Considered a flagship program of the ERC that took years to prepare, the CSP is designed to get the least cost of electricity for consumers by forcing a distribution utility (DU) firm, like Meralco, to receive at least two qualified offers from generation company, with which the DU is not prohibited from entering into a power-supply contract.

The Ombudsman stressed that the CSP should have taken effect on November 7, 2015, when the ERC en banc passed Resolution 13, Series of 2015 (or the 2015 CSP Resolution). But, on March 15, 2016, or months after the CSP took effect, the ERC came out with Resolution 1, Series of 2016 (2016 CSP Resolution), modifying the CSP’s effectivity to April 30, 2016, thereby extending the deadline that effectively led to the accommodation of PSAs that the consumer group Alyansa Para Sa Bagong Pilipinas Inc. questioned in their complaint before the Ombudsman.

The Ombudsman concluded that there is sufficient evidence that the suspended ERC commissioners gave unwarranted benefits to Meralco and other companies by exempting them from the coverage of the CSP requirement, which was already in effect after November 6, 2015.

“Their [the ERC officials’] gross inexcusable negligence led to the circumvention of the government policy requiring CSP and denied the consumers the ‘opportunities to elicit the best price offers and other PSA terms and conditions from suppliers.’”

Mosquera knows whereof he speaks. The Deputy Ombudsman for Luzon has earned over the years a reputation as an anticorruption advocate, having served as a United Nations adviser for anticorruption and as chief of party of an anticorruption project funded by the United States Agency for International Development before his ERC appointment.

Devanadera is waiting for Malacañang’s guidance on how to proceed dispensing the ERC’s duties without the rest of her board, while Energy Secretary Alfonso G. Cusi has asked Duterte to consider appointing temporary commissioners to keep the regulatory body functioning.

If the President does ap