Sunday, January 25, 2015

Only in the Philippines: Public suffering underwrites showcase for profit ventures

In theory and in practice, grand and frontier projects undertaken by private players with government support do not impose a direct levy on the public to keep the programs going. The government cannot— and does not—exact a pound of flesh from ordinary Joes to subsidize such ventures, projects and programs, no matter how grand or how pioneering.
It is also the moral thing to do, just our revered visitor said over and over again during his brief stay in the country. Everything should be done to ease public suffering.
More, there are options to support state-favored initiatives other than a direct levy on the ordinary people and common households. The government can turn to an entire menu of options on how to support the private players engaged in a state-supported undertaking.
For one, it can provide guarantees to these programs. Second, it can nudge foreign governments and multilateral institutions to channel loans and grants into the direction of the supported programs. If it is within the law, the government can redirect non-essential items in a national budget to support these favored programs.
I don’t know if the government can float bonds to help raise money for these programs. In this current regime of low borrowing rates, the Philippines can easily turn to the foreign credit market to borrow money for these programs.
What I do know is that there is one no-no, one thing that the government should never do. This is to ask the public to pay for, to directly subsidize, these ventures.
But you know what? There is one current venture wherein the government does exact a levy on ordinary households to subsidize a program it supports- the renewable energy development program. Starting this month, on-grid electricity users (millions of households and tens of thousands of businesses) will pay an additional 40 centavo per kilowatt hour, which the government will pass on as incentives to those that will build renewable energy facilities, those projects that tap on air, water and the sun among others to build power facilities.
In short, the government support to these renewable energy players is now being shouldered by electricity users, with the bulk of the burden falling on the households. For-profit projects underwritten by public suffering. Only in the Philippines do we see such kind of abominable, anti-poor policies.
If that subsidy is not patently immoral or illegal, I do not know what it is. Do you remember the ancient story about the Greeks bearing gifts? The plot line is very much the same.
The additional burden to electricity users would have been bearable were its duration short term. Say, a levy that would last one year or five at the maximum. On this issue, the government schemed to inflict a long-term penance on electricity users. The 40-centavo per kilowatt levy would last for 20 long years.
The yearly collection, small at a superficial look, would yield P2.7 billion a year for the renewable energy players. Two decades of P2.7 billion a year in subsidy to these for-profit companies, which, in the first place, are supposed to engage in the renewable energy field using their own money, or funds they themselves have generated from the capital market.
According to a Supreme Court petition filed by an activist-lawyer to stop the collection, this hare-brained and cruel policy was decided by a recent resolution from the Energy Regulatory Commission (ERC). The ERC simply authorized the National Transmission Corp. to collect the additional charge of 40 centavos per kilowatt hour.
Just like that. The ERC had its eye focused exclusively on the manna to the private players. But was blind to the suffering of millions of electricity users.
Was there due consultation? Were there public hearings? Apparently none. The US had its Solyndra —its epic fail on the renewable energy front. Our version is—for lack of a better word—a scam imposed on the hapless electricity users.
Why should the SC stop this ERC-Transco conspiracy? Here are some reasons.
• Neither the government nor the private players have presented a clear picture on the pass-on benefit to the public of the direct levy. No math, no chart, no scoring on how the electricity users would get something from the levy exacted on them.
• The renewable energy field, blessed by new technologies, can now build plants and facilities at a cheaper cost. They may not need such gargantuan, long-term subsidy.
• The private players entered the renewable energy field driven by the profit motive, not with a sense of altruism. Why should public suffering underwrite these purely for-profit motivations?
In the calculation of households, a sizable percentage of the family income goes to electricity. It is at the second tier of the major expenses after food, clothing, shelter and transportation. The SC should stop this state-inflicted burden as it would hit hard on already-burdened ordinary households.

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