Monday, September 19, 2005

Power Rates Hike

As I See It : Napocor petitions for yet another rate hike

Neal H. Cruz
Inquirer News Service

WILL OUR MISERIES NEVER CEASE? AFTER the expanded value added tax-which, upon its implementation beginning this month, will trigger a chain-reaction of increases in the prices of practically everything-we will be hit by another wallop. The power rate will increase-again-as if it is not yet high enough.

While the whole nation's attention was riveted to the political crisis, the National Power Corp. took advantage of the distraction to petition the Energy Regulatory Commission for yet another 71-centavo rate increase. The ERC already granted, just late last year, a provisional authority to Napocor to increase its rates by an average of P.9798 per kWh. In this latest petition, the power firm refused to go into the details as to why it is asking for another increase. It just said the increase would cover the cost of "oil and other operating expenses" of the ailing state-run firm.

On top of the rate increase, Napocor also managed to quietly get another $400-million (more than P2 billion) foreign loan. Of this, $300 million was obtained through the issuance of six-year floating rate notes. The remaining $100 million, secured only last week, completed the financial package. The fresh borrowings are all guaranteed by the government. They will set back the privatization of Napocor as mandated by the Electric Power Industry Reform Act (Epira).

Napocor is already the biggest contributor to the national budget deficit. It is expected to incur another P31 billion in losses this year, in spite of the fact that the Philippines is already running neck and neck with Japan, Asia's richest nation, as the countries with the highest power rates in the region. The Philippine government has already absorbed P200 billion (repeat, billion) of Napocor's debts, pursuant to the Epira. Thus, the taxpayers will have to pay for Napocor's debts, old and new, on top of higher electricity rates.

But while the government is quick to implement the Epira provision absorbing Napocor's debts, it is very slow in implementing the provisions to privatize this biggest of the government's white elephants.

Where does the money go? Here is only one example: A joint congressional panel investigating Napocor found out last year that thousands of Napocor officials and employees were paid a total of about P12 billion in retirement packages in preparation for the firm's auction sale.

Of the amount, P119.4 million was given to 25 executives and senior officers. After getting their generous retirement benefits, these top management executives were then re-hired at similarly fabulous salaries.

How can the government ask the people to pay higher taxes when it is squandering Napocor's dwindling funds to graft and corruption, in bribes to congressmen and mercenary witnesses, and for the expenses of camp followers made to travel abroad just to clap during GMA's speeches?

Why the government is giving priority to Napocor's fresh borrowings rather than to its privatization, as provided by the Epira law, is still a mystery. Privatization will, in fact, help the government raise the funds needed to pay Napocor's debts and reduce government borrowings as well as the tax burden on Filipinos. Privatization is one way to stop the financial hemorrhage brought about by new borrowings and to arrest the government's worsening fiscal condition.

New borrowings, on the other hand, will add to the already unmanageable debt burden. Who in his right mind will buy Napocor with its gargantuan debts?

Adding insult to injury is the jubilation of the Bangko Sentral over the new borrowings, when it should be sorry for them. Why? The latest borrowings, the Bangko Sentral boasted, "boosted the country's gross international reserves to an all-time high of $17.852 billion!" Adding more to our debt burden, that's something to be proud of?

Budget Secretary Romulo Neri, the guy who has started refusing to sign checks because there are no more cash to cover them, was more circumspect when he correctly pointed out that Napocor's debt is taking its toll on the government's fiscal position, with the bulk of government expenditures during the first seven months of this year going to interest payments alone. The bitter truth is, the government has no clear picture of what to do with the ballooning budget deficit and foreign debts. And Napocor is already the biggest single contributor to this deficit.

The Philippine government is already in a debt spiral-borrowing more to fund interest payments alone-not even the principal of maturing loans-thus making our national debt bigger and bigger, with no sign of how and when the spiral will end. This is the straight path down to bankruptcy.

The government's solution is simplicity itself: squeeze more taxes out of the people. But the Filipinos, among the poorest people in the world, have no more to give. They can't even afford their daily bread; where will they get the taxes to pay the government? They will be like the goose that lays the golden egg, which the greedy giant forced to lay more and more golden eggs so that it died.

I think Congress, which has the power of oversight on these borrowings, should look into the picture again and see where the money is going or has gone. It is imperative that Congress look into this mess because the executive branch has shown that it cannot stop the financial hemorrhage but, in fact, contributes to it. Just look at GMA's latest secret deal-the Venable lobby contract that will cost the taxpayers another P4 million a month, another expense they can no longer afford.

Who knows how many of these secret deals are still out there undiscovered?

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