A Free Power Industry for Cheaper Electricity

Have you ever wondered why most so-called intellectuals in these parts are more interested in supporting more regulations in the power sector and in blaming the “incompetent” government for not being ‘socialistic’ enough than in identifying the root cause of our power crisis?

The only possible answer I can give is: They have a misguided or confused understanding of ‘public service’ in that electricity, being a public service, must be aggressively regulated by the State to serve the greater good. What exactly is their concept of the ‘greater good’? Well, none, except whatever they deem is good for the greater or greatest number. Who is empowered or authorized to determine the greater good? Perhaps the head of the state and his allies or the greatest number.

Yet logic tells us that anything that we buy is a “public service”. Like any product or service, the power market is subject to the laws of supply and demand. It is subject to the laws of economics as well as to market forces.

Communication gadgets (e.g., cellphones, tablets, etc.) get cheaper and better due to intense global competition. This market is not subject to our protectionist policies because Filipinos don’t have the knowledge and technology to produce world-class communication gadgets. We import both technical knowledge and technologies that help us keep up with the global economy.

Observe that only industries that benefit Filipino cronies and oligarchs are protected by our laws against foreign competition. While we acknowledge that our economy needs outside knowledge and technology, we spit on the goose that lays the golden egg. Why, this is what our protectionist ancestors like Carlos P. Garcia envisioned– we have to be the master of our own land.

But honestly, did we fulfill their vision? I don’t think so. Why is it that after decades of protectionism and Filipino First Policies we have pitifully ended as a nation of domestic helpers and as one of Asia’s biggest basket cases of failed protectionism.

We only allow foreign oil companies (they are all subject to our 60-40 protectionist rules) in our economy by means of technology transfer, partnership ventures, financing schemes, among others because, again, Filipinos don’t have the technical know-how and the necessary technologies to explore, extract and produce oil that we need.

Despite limiting foreign investment, our country still benefits from global trade in the form of cheaper imports and technology transfer.

Undoubtedly, today’s prevailing Filipino mentality is: We slap and kick and spit on goose that lays the golden egg.

Who worked on dictator Ferdinand Marcos’ Bataan Nuclear Power Plan? Western scientists and engineers, of course! Still surviving Marcos loyalists often boast of this multi-billion dollar project as Marcos’ solution to our dependence on foreign oil.

Who brought us the power technology and knowledge that electrified our then fledgling economy and industries? The Americans! Yes, we wanted their technology and knowledge so badly, yet we kicked them out of this country when the politically connected oligarchs were able to establish their economic power base through government help, loans and subsidies.

Now Filipinos want cheaper electricity.

First, there’s something our government can do to help the poor by lowering power prices. It has to scrap the 12% EVAT imposed on electricity.

The Leftists’ and Centrists’ answer to cheaper electricity is either nationalization or more regulations?

The leftists and left-leaning protectionists, like the advocacy group Freedom from Debt Coalition (FDC), call for the repeal of the infamous EPIRA law and state ownership of the power industry.

FDC president Ricardo B. Reyes proposed the following solutions:

  • Dismantling private monopolies in power generation and distribution
  • Reintroducing the state as owner and player in power generation and distribution along with the social sector- the cooperatives
  • Renationalizing the transmission sector
  • State planning of the power industry, which shall also harness private capital  to contribute, not to dominate the power industry

Private monopoly? This highly-schooled ideologue seriously needs to study proper economics in order to get his facts straight. What we have in the power sector and all other industries is government-protected monopoly. Filipino-owned power generation and distribution firms (like Meralco) are protected from both domestic and foreign competition.

Mr. Reyes and his colleagues have so much faith in the government that they are willing to give absolute control of our power industry to some diploma-toting, incompetent,corrupt political appointees and bureaucrats.

Others want excessive regulations put in place to moderate power firms’ greed.

But what is there to regulate when the power sector is one of the most regulated in the country? Perhaps more aggressive price controls is what they want.

For the Centrists, they want to keep our protectionist system (e.g., they want to let Meralco and others stay) and to impose more aggressive price controls as well.

But price control won’t work. It will not just bankrupt the protected firm; it will also scare investors away. Also, price control will inevitably lead to more subsidies or the use of public money to support the regulated company or industry, thereby justifying more government control and politization of the market.

Now if you want cheaper electricity, the only practical solution is: fully allow foreign investors and talents to join our Team. This is what the Asian tiger economies did more than one or two decades ago.

Let foreign power companies compete with our own power producers and distributors. For the leftists and protectionist Centrists, a free power sector is a radical solution. I agree, freeing not only the power industry but also the whole protected economy is a radical solution, but this is exactly what we need if we are to survive, both politically and economically.

EXTERNAL LINKS:

Electric Utility Reform: The Free Market Alternative to Mandatory Open Access

Providing Access to Electricity for the Unserved: A Free-Market Solution

Using the Free Market to Expand Access to Electricity

The Choice Is Yours: Competition in Retail Electricity Markets

Brazil: Brazil’s Electricity Market: A Successful Journey And An Interesting Destination

A Free Market Would Avoid Blackouts Now

2 thoughts on “A Free Power Industry for Cheaper Electricity

  1. Pingback: REALITY BITES: HK Textbook Depicts Filipinos as Maids | VINCENTON

  2. Pingback: More on the power rate hike in 2013 | electricityasia

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