The evils of cross-ownership in power industry (2)

by Neal Cruz, republished from Philippine Daily Inquirer website, September 07, 2007

MANILA, Philippines — The previous column dwelt on proposals to amend the Electric Power Industry Reform Act, or Epira (endorsed by President Gloria Macapagal-Arroyo) because instead of reducing power rates, which was its original intent, it resulted in even higher rates and, in the future, even a worse situation. One of the major flaws of Epira was in allowing cross-ownership of corporations in the power industry.

The previous column discussed three of the five evils of cross-ownership: (1) it resulted in higher power rates; (2) it subverts the development of the power generation sector; and (3) it will cause billions of pesos in losses to the government. This column dwells on the last two evils.

Evil No. 4: It corrupts and impedes good governance. Cross-ownership breeds an enormous monopoly in both generation and distribution sectors that will overpower the regulatory agencies, energy policy, and, worst, control politics in the country.

An analysis of the present composition of the Senate is not very encouraging. Seasoned political analysts agree that the Lopez empire’s influence in the Senate is formidable. It also holds a significant sway in the House of Representatives. It owns and maintains a formidable media machinery that can make or unmake a politician seeking national office like a seat in the Senate, the vice presidency, or the presidency.

Already, even while the committee assignments in the Senate were still being worked out, Sen. Joker Arroyo publicly declared that there is no need to amend the Epira? He said only the Joint Congressional Power Council is needed to do the job?

Such a premature declaration dismissing the urgent need to amend one of the most abusive and flawed pieces of legislation ever passed by any Congress in the republic bodes ill for all consumers. To understand Arroyo better, it was during his watch as executive secretary of President Corazon Aquino that Manila Electric Co. (Meralco) was turned over to the Lopezes lock, stock and barrel with nary an audit and evaluation of what the Lopezes ought to have been given back. A franchise area far bigger than the original franchise of Meralco was given to the Lopezes. They got more than what should have been given back to them and what they did not own at all.

The evils of patronage politics and the power and influence of money and a media machine certainly aggravate the culture of corruption in the country. It also makes the task of amending Epira a daunting effort.

Evil No. 5: Electricity will continue to be overpriced and abuse of consumers will remain unchecked. The accompanying disinformation campaigns that this behemoth can launch to protect its interest or hide abuse from the unsuspecting public results in a misinformed public, very susceptible to abuse.

Today, the Philippines’ power rates are among the most uncompetitive in Asia, thus affecting our country’s industrial and commercial performance. Tens of millions of dependents of overseas Filipino workers see their hard-earned remittances eroded by the high electric rates. No matter how hard our people work, a huge amount of their income is eaten up by skyrocketing electricity rates. Now is our chance to excise an evil in our system to give our people some measure of relief from already difficult times.

Completely banning cross-ownership between power distributors and generators is not only urgent but a matter of national survival. We cannot afford its evils.

Click here for part 1

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