Thursday, May 8, 2008

Government Stupidity--the Real Cause of High Electricity Rates in the Philippines

There is no doubt that surging global oil prices are a major reason for our high electricity rates in the Philippines, given that 55% of our electricity is generated from fossil fuels. But for many people, that must have been quite an eye-opener on Ricky Carandang's show, The Big Picture on ANC tonight into some of the reasons why those rates ought not to be that high and why the Arroyo administration is primarily to blame for it. Excluding things beyond our control (like the rising global price of oil currently above $120/barrel) it boils down to two absolutely insane government policies, were it not for which those rates would be significantly lower:

(1) Napocor has steadfastly refused to sign long term supply contracts for its dirty coal fired power plants, insisting instead on buying coal primarily on the spot market current at over $130 / ton; and

(2) P1.46 government royalty on domestic natural gas amounting to more than a third of the P4.10 per cubic meter paid by First Gas (a Lopez-owned independent power producer).

By way of comparison, a private IPP, Quezon Power, an American owned firm, signed a long term coal contract that guarantees it coal at $60 / ton, less than half what Napocor now\ pays. Why does the government insist on buying coal on the spot market? One wonders. Maybe it's the same reason in imports rice at exorbitant rates--for the damn commissions by unscrupulous government agents and cronies of the powers that be! At the same, as Ricky's guest noted, that large royalty component on Malampaya gas levied on such IPPs as First Gas, buggers the use of much cleaner natural gas to produce electricty. Overall, the private energy generators are much more efficient and I daresay, saner than Napocor and the government. But no wonder they've dragged their feet and not carried out the mandate of the Epira law to privatize the energy sector. It's too lucrative for the bureaucrats and their cronies to just give it up to those oh so evil and imperialistic free enterprise capitalists.


mesiamd said...

That's why we need social conscience when we accept leadership in private and public offices. If those at the top are self-centered, immature, uninformed, and profit-driven whithout the barest concern for the community, the whole country suffers. I think we have yet to see the tailend of this trend and more is bound to happen.

Anonymous said...

What more can I say that has not been said.

I will just give it a shot.
No matter how they say that government can't run business, and should stay away from it. With everything lucrative around there,how can they?

Social conscience;sounds better than social,corporate, and stakeholder responsiblity.

Cocoy said...

i'm not a huge fan of meralco but i'm so peeved when Government thinks that the only alternative is to takeover (or threaten to do so) a privately owned corporation. isn't it why Napocor and transco are being sold to the private sector in the 1st place? Because by their very nature, those government owned corporations are inefficient?

Government should not be in the business of private enterprise. ever.

sadly i think you are right: "It's too lucrative for the bureaucrats and their cronies to just give it up to those oh so evil and imperialistic free enterprise capitalists."