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Fight Back! Power Splurge


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Power splurge
Cronyism is alive and well and living in the Philippines.
Maitet Diokno-Pascual looks at how privatized electricity
has taken consumers for a ride.

In May 2001 Philippines President Gloria Macapagal-Arroyo signed into law the Electricity Power Industry Reform Act (EPIRA). President Arroyo promised to bring down electricity rates by breaking up the state-owned National Power Corporation. The NPC monopoly would be chopped up, she proclaimed, and sold to the private sector. The bill was initially introduced in 1997. But a vigorous campaign by the broad-based Filipino Freedom from Debt Coalition (FDC) slowed down its passage - even though the pro-privatization lobby said the bill was 'too technical' for non-experts.

In the end, however, the NGO group couldn't overcome the influence of the powerful energy lobby - a motley crew of élite business groups, transnational power companies, corrupt politicians, government bureaucrats and officials from the IMF and the Asian Development Bank (ADB). In 2000 the IMF and the ADB threatened to withhold credits worth nearly a billion dollars unless the bill was given the green light. And more than one pay-off was made to persuade legislators to pass it. Two opposition politicians confessed to receiving $10,000 pay-offs under the previous Estrada Government. But no matter, those in power - including the IMF and the ADB - turned a deaf ear. The bill had to pass, despite blatant corruption and protests from consumers that it would do nothing to lower electricity prices.

The Freedom from Debt Coalition made it clear that Filipino consumers were being squeezed to bail out private power producers. The group was among the first to show the connection between sky-high electricity rates (second only to Japan in Asia) and the previously murky world of Power Purchase Agreements (PPAs).

The IMF threatened to withhold credits worth nearly a billion dollars...

In order to attract investors to build new power plants (under pressure from the World Bank and others) the Government guaranteed a market at a set price for any new capacity. The state-owned National Power Corporation was obliged to pay private producers in US dollars for the power they generated - whether or not there was a market for it. In effect state guarantees underwrote private investment. Today Filipino consumers pay a special PPA 'adjustment' on top of their normal power bills which sometimes totals half the bill. And the recent legislation, which privatizes the state distribution system, does not privatize the associated debt. Filipino taxpayers will continue to shoulder that burden.

The Freedom from Debt Coalition for its part is demanding a 'democratization of ownership' of the power sector. Consumers, the group says, should be given the opportunity to own generation and transmission facilities. After all, consumers have been the real source of capital and they've been stuck with the PPA debt. Public ownership would also break the monopoly hold of a few families and prevent concentration of ownership by foreign companies.

The Arroyo Government says privatization will take time to work, so consumers must be patient. But Filipinos are rightly suspicious. They could be paying the price of this blind faith for some time to come.

Maitet Diokno-Pascual is a Filipina economist and former president
of the Freedom from Debt Coalition, 34 Matiaga St, Central District,
Quezon City, Philippines. www.freedomfromdebtcoalition.org

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