As oil prices poise to breach a hundred per barrel, energy secretary Angelo Reyes does the right thing: Nothing.

Reyes is doing right by not announcing any populist moves. After all, at least as far as I'm concerned, the oil deregulation regime has been doing just fine. If we were in the late '80's or mid-90's, the scandal-ridden administration would already have been ousted by a coup by right-wing adventurists, who, in those times, timed their moves based on the movements of prices in the world oil market.

It is now close to a decade since we finally smashed the old illusion that oil price subsidies were pro-poor, perpetuated for a long time by the middle and upper class leaders of so-called 'people's organizations.' Note that at that time nominal prices were below 20 dollars per barrel. Now the high is about five times. But we don't hear of any outrageous manifestos that the increase is caused by the local ruling class in conspiracy with foreign capitalists, do we?

I have a list of measures the energy secretary might consider, but none of these will lower gasoline prices for the middle class. In the meantime, he should just stand his ground.

Here's a list of easy energy saving tips promoted by Iran's revered president.

Goodbye to long-winded arguments

In the early 1990's I had never-ending arguments with environmentalists about why the National Power Corporation did not include wind energy in its power portfolio. I would always answer that the costs were too high. I said I would agree if there were a democratic process where power consumers would be made aware that the wind option would significantly increase their bills.

Now here is a PCIJ feature by Jaileen Jimeno which finally proves the point, self -serving it might be for me. Since 2005, the power facility Jimeno discusses in the article has been operating.
I must point out , however, that she missed one important point, the economics of wind energy. Since the early 90's , costs have fallen by 80% while costs for the alternatives, especially for fossil fuels, mostly oil and coal, have been steadily increasing. Thus, it is no surprise that wind is now competitive and will become more so henceforth.

Corrruption and inefficiency in Philippine Rural Electric Cooperatives

The conventional wisdom is that the major reason for inefficiency and corruption in rural electric cooperatives in the Philippines is the lack of incentives for good management. Because there is no group of private stakeholders large enough to care how an REC (rural electric cooperative) performs, the managers are left to their own devices, especially if their pay is not linked to such performance. While the coop members elect the boards of directors which in turn supervise the managers, that is pretty much where their participation ends, which is why it has been said that the RECs are cooperatives only in name.

REC elections are also said to be well-contested because the boards exercise tremendous political power; in some cases even more so than local government elections. In fact, the party-list party of the rural coops, APEC, has always been a top vote-getter in national elections owing to a large bloc of ‘command votes.’

Occasionally a group of members might have enough community spirit to exercise vigilance over management while the rest of the members simply ‘free-ride’ on their efforts. This is also why the standard (and perhaps even dogmatic) prescription is to encourage the entry of private capital imbued with a profit motive to lower costs. But that is just one solution to enforce greater accountability and efficiency, by encouraging greater membership participation.

This is what this account of graft and corruption in BATELEC II (Batangas Electric Cooperative II) illustrates: member vigilance and heroic management. The board, elected in 2003, is facing charges of corruption brought by some members (in 2005) for approving and awarding a P75 million computerization contract to I-Solv, a company based in Metro Manila, with a paid-up capital of P62,500 and organized just a few days before the contract award in April 2004.
The graft charges were presumably lodged after the National Electrification Administration (NEA) audit, at the instance of the same group of members, found the whole project irregular for lack of the proper technical study and bidding. Furthermore, the board had usurped the authority of the bids and awards committee, the audit said. It also found that the board approved a 100% overprice of 10 boom trucks. In this controversy, general manager Marlyn Caguimbal has been on the side of the members.

It is unfortunate that PDI reporter Marlon Ramos ends his account with developments way back in 2005 and thus leaves us wondering on the status of the case and what other actions, if any, the NEA has taken against the board.

About nine years ago, I had occasion to visit the offices of BATELEC I, the other REC serving Batangas, and was impressed by the professionalism of management. The REC had been chosen for a brief historical case study, excerpted in a chapter of The Challenge of Rural Electrification, Strategies for Developing Countries, edited by Douglas Barnes and recently published in May by Resources for the Future (RFF) and Energy Sector Management Assistance Program (ESMAP). I co-wrote the chapter on the Philippines “Power and Politics in the Philippines” with Gerald Foley.

Electricity and Philippine Growth: amateur detective work

I can understand why the recent GDP growth figure of 7.5% has elicited a lot of skepticism and hostile criticism , and most of the justification has to do with the fact that even the middle class, especially in Metro Manila don’t feel better off compared to last year.

Let me first disclose that I am confident about the professionalism and integrity of the people who compile and estimate the growth statistics. I have worked for long periods with NEDA assistant director general Estrella Domingo, mainly in the nineties, and mostly in regard to estimating the environmental impacts of growth. She and her people are competent and open to criticism and suggestions, especially in regard to methods.

First let us grant that the statistics are correct. The natural questions to ask are where did the growth come from, which sectors and which regions?

Growth in electricity consumption

My preferred method of validating economic growth figures is through looking at electricity consumption. So I examined the sales figures of Meralco for the first semesters of last year and this year. The second row of the following table shows percentage growth in kilowatt-hour consumption by customer class. The Meralco service area comprises about 60 percent of value added (GDP) in the Philippine economy.

Residential	Commercial	Industrial	C+I	Others	Total
3.02	5.78	3.59	4.83	-1.80	4.18

From the figures above, here are my initial observations, not necessarily in order of importance:

The NSCB claims growth is consumption-led. Clearly growth in residential consumption is much less than overall growth, and is also less than growth in personal consumption expenditures of nine (9) %.. Thus the elasticity of demand for household electricity is less than 1 (0.33), which means an additional peso of income creates much less demand for electricity in the Meralco area. This could be higher in areas outside MM (AOMM)., which is intuitive because these areas are starting with less electricity consuming appliances.

1. But looking at C+I in electricity consumption in Metro Manila, which is much less than growth in the value added of the service and industrial sectors (8%) per NSCB nationwide, I can only surmise that growth in these sectors must be happening in AOMM. Unfortunately, the NSCB does not provide a spatial disaggregation of value added and growth. But this is the most likely explanation I can find.
2. If we assume that GDP growth in Metro Manila is the same for the rest of the country, it would mean that the elasticity of demand for electricity overall with respect to GDP growth would be .56, which is contrary to historical experience and incredible.

From the above, if we assume the NSCB figures are correct, these can only be explained by higher growth in AOMM.

To whom is credit due?

Here I will allow myself some political bias, which you might agree is justified. The effects of policy always come with a lag, and it would be fungus-faced (to quote my favorite senator) for the Arroyo administration to claim credit for the growth figures. It is probable that phenomenal growth occured inspite of its incompetence and erratic responses to threats of its survival. One thing I can concede, without offering empirical proof, is that the value added tax did and does lead to a higher growth trajectory.

Equity and skepticism

Among the more reasoned essays with respect to equity and healthy skepticism published in cyberspace recently are those of Ricky Carandang and Manolo Quezon.

On the matter of equity, the Central Bank used to publish a disaggregation of GDP into returns to capital and labor but it stopped doing this sometime in the 1980’s. A simple way of ascertaining whether growth is equity-enhancing would be compute the growth in the ratio of labor's share per capita (simply divide the labor share of value added by population growth). Unfortunately I have no method to estimate this, though I suspect that if domestic demand is fueled by OFW income, growth, and if consumption growth accrues to sectors in the economy with market power, growth might be inequality enhancing. Note that I am not sure about this.

For those interested in the structure of the economy and the growth figures click here. The NSCB has one of the better government sites, but please write the webmaster and demand that it present data files in downloadable format.

The continuing decline of energy sector institutions

Just had dinner with a reliable newly elected congressman who quoted other neophytes requesting anonymity in aid of obscurity. The buzz in the House is that the unpalatable Michael Defensor is being groomed to be energy secretary. From good to acceptable to bad to worse. What say you?

Mikey Arroyo's thin line on energy

I have no idea where he came from, but he has a lucky mother. But when I saw him on ANC last night saying there was a thin line between the independence of the Energy Regulatory Commission and the wishes (populist and manipulative) of the executive, I was alarmed. Rep. Mikey Arroyo, chair and lone member of the House energy committee, at first seemed cautious, until the interviewers got the better of him. And that was when he not only betrayed his ignorance (forgivable) and then his political tendencies (unforgivable).
Most every observer of the Philippine energy sector would agree that one of the main problems of sector regulation is the lack of transparency aggravated by the discretionary powers of the regulator, complexed with the political influence of whoever wields executive power. Sometimes, this weakness is utilized by all sorts of contending political factions (including, unfortunately, those from the Left and who should know better).
The independence of the regulatory bodies in the sector has seen some ups and downs in the close to three decades I've been in it, as an active participant and observer. I must say we might be hitting anothe new low.
Less power to you, Mikey Arroyo.

p.s. My favorite senator and neighbor, who went epileptic with the appointment of Angelo Reyes as energy secretary, must be baying at the moon.

Masinloc and Philippine power rates (1)

Except for the self-congratulatory releases from the energy bureaucracy, the response to the successful bidding of the 600-MW coal-powered Masinloc plant has been muted. At $ 930 million, the bid of Singapore-based and AES-led consortium was 50% more than the winning bid of YNN Pacific, which forfeited its rights after failing to pay the required downpayment last year. The Power Sector Assets and Liabilities Management Corporation (PSALM) has divulged neither the bids of the five other bidders nor its reservation price. But its announcement did say that all the bids surpassed the latter. Some reporters revealed all the bids, but the figures have neither been confirmed nor denied. This is PSALM's release.
In the first round, all the competing bids were revealed to members of Congress whose various committees launched investigations in aid of one thing or another. But let’s get back to this later.

So, what would the sale, if concluded successfully, mean for the Philippine electricity consumer? The short and long answers are, it depends on how competitive the electricity markets in the country will really be in in both the medium and long term.

To understand the consequences for the consumer, we need first to understand how the privatization of NPC assets affects NPC rates in the short run. In the short short run, it won’t. This is because of the so-called regulatory lag, which delays warranted upward or downward adjustments in rates due to changed circumstances. But in the medium and longer term, my bet is the high valuation by the winning bidder presages higher rates, and not just higher rates, but higher rates based on higher profit margins for the new owner of the generation asset. (In nominal terms, there is no way but up for rates because of higher fuel prices based ultimately on world demand).

If the sale is concluded, then, before the end of the year, the new owners will be a new participant in the wholesale market. Most of its net revenues will depend on the market-clearing price and its operating costs----mainly variable or fuel costs. Let’s grant that the latter does play a role in the equation, because the new managers, with greater accountability to the new owners, have greater and more palpable incentives to reduce costs. But I find it difficult to imagine that the differences in the bids can be attributed to this factor. In my experience, the owners and managers of newly privatized power assets usually retain the technical personnel, whose bright ideas were just suppressed and ignored by a system lacking in incentives and accountability. The new owners don’t have an Einstein up their sleeve and even if they did, the other bidders would have had access to him or her, at the right price.

My guess is that the new owners can justify their high valuation or recoup their investmentsonly by exercising market power in the wholesale market. In the long run, this is not necessarily bad for the consumer. But in the the short and immediate periods, expect higher rates, but don’t blame me.

Help! Our prayers have been answered....

Last week, a top official of the Department of Science and Technology was on TV saying that if cloud-seeding efforts did not succeed in inducing rain to help fill our dams and inducing cooler weather, we could do nothing more but pray... A science official's resort to prayer doesn't really inspire faith.

Of course not everyone agrees on the power of prayer, as a US governor found out.

Now the rains have come. Although it is too early to say whether these will continue and alleviate the water and hydropower shortages, it is clear enough that heavy rains always come with the perennial consequences: flooding, traffic jams, lost school-days...

One of these days, our top officials, failing to sell the idea of emergency powers for the executive, might consult with a Norwegian princess on talking to angels. It is unfortunate that this member of the royalty proves that royalty can be such royal... By the way, Norway has a very sensible policy in managing it's oil resources, treating these as an endowment for all it's citizens instead of squandering these in the short term.

Clouds, now, from both sides

I’ve looked at clouds and the climate for over two decades and I must say the claims of our weather, energy, and science officials are a bit befuddling.

In the early 1990’s I was investigating the remote and immediate causes of the crippling power shortages, and observed that unseasonably bad weather inflicted a double whammy on power consumers in the Philippines. The less rain there was, the less hydroelectric power availability and thus the higher were electricity production costs. At the same time, less rain entailed higher ambient temperatures and thus greater demand for airconditioning. This is true for the whole country, and to all countries similarly situated. It is a double whammy indeed, for both supply and demand factors result in lower satisfaction at a much higher price.

From Nick Nichols I learned that Cyril del Callar of NPC had been quoted as saying that the current cloud-seeding operations were meant more to lower ambient temperatures, and thus lower airconditioning demand, rather than to increase the water levels in the dams of the hydropower facilities. Yet, the pronouncements of spokespeople of the departments of agriculture and of science of technology belie this. And so does the an article in the weekly newsletter of NPC, which clearly associates the cloud-seeding with attempts to elevate dam water levels.

I had a brief exchange with Cyril first to ask him whether there was any ‘optimal’ cloud-seeding effort level. Perhaps he did not appreciate the import of my question and said no. He said that in terms of NPC cash operations, the expenses were justified.

Now, if you follow me, why don’t we spend billions instead of a few million to induce rain? I am an advocate of science and economics and would thus suggest that government spend on cloud-seeding as much as and until the incremental costs exceed the marginal benefits. And, to my knowledge, we are far from there, although I need to study both the science and economics more thoroughly.

Incidentally, government spokesmen recently admitted that cloud-seeding operations could be concentrated on specific areas when clouds were favorable. That might buttress suspicions that government can exercise weather control to lessen attendance in poitical opposition rallies. Triple whammy!

Reyes: Energy is a political commodity

It is one thing to say that it requires great political skill to manage energy policy correctly and quite another to say that energy is a special political commodity, just because price movements can bring political unrest.

Since the deregulation of the downstream oil industry in the second half of the 1990’s (after a supreme court hurdle and a decision I found ignorant), petroleum products pricing has in the main been left to market forces. This is not to say that there is no market power being exercised by the major players. There clearly is, but I do not miss the days of the Oil Price Stabilization Fund (OPSF) and the associated subsidies, when prices were regulated and such regulations were hostage to political acceptability (including by coup plotters).

Just imagine if refined productc prices were still regulated now, with the P/$ exchange rate and the world price as these are now. I’m glad consumers---most of them anyway---are adjusting without taking to the streets. I dare say that even now, petroleum prices are lower than they would be if we considered the full impact of their use on the environment. If prices were still regulated today, the government would be heavily subsidizing oil prices and it would not be beyond the current administration to subsidize prices just to remain in power. This would have been disastrous as oil price subsidies generally benefit the richer sections of the population---regardless of the protestations of the misinformed sections of the Left.

Comes now the newly designated energy secretary, who candidly admits his only qualification to the post is that he is ‘full of energy.’ It is also likely that he is full of something else. It might also be true that he is indeed a fast learner and that thus far, he has not disappointed the appointing power. But if he indeed has the management experience and the IQ to manage difficult government departments, Reyes should have been appointed chief of PIGSA (Philippine Inter-Galactic Space Agency) which needs his skills.

The truth is that Malacanang has just been using him as a convenient football and kicking him to energy conveniently leaves the DENR post vacant for the former mayor of Manila, he I cannot name because I puke because of all his sanctimoniuous and false religiosity---although I might still puke even if the religiosity were sincere. The former mayor would have been more obviously incompetent in the energy post. This does not mean he would be good as environment secretary, or that Reyes would do so badly at the energy post, though this is laden with many challenges that even Lotilla was just beginning to appreciate. But we cannot fault Popo for leaving now. Popo deserves a rest, although the timing is not good, especially with the problems of power sector reforms not really close to resolution. (Manila Standard Today yesterday said Lotilla was fired. False).

Former energy secretary Geronimo Z. Velasco passed away a few days ago and his passing was publicly announced by an acquaintance at the PNOC. It might be that the man did the nation a great service. But comparisons are difficult because he managed the energy sector under radically different circumstances. And he had economic and political resources unimaginable at this time. Our sympathies to his family and friends.

energy self-reliance(2)

After that brief critique of Dr. Viray’s review of Geronimo Velasco’s book, I’ve decided to write more on energy self-reliance. This time it’s coal.

Back in 1993 when I attended some discussions on the further lifting of quantitative restrictions and the lowering of tariffs for coal, the spokesmen for the local coal industry, as expected, presented the local industry as a champion of its workers. In diplomatic language, I would point out that local coal workers actually were not only underpaid but also faced very hazardous working conditions. Suffice it to say that coal mine explosions were not rare, especially in Cebu mines controlled by a northern warlord. How diplomatic could one be in saying such arguments were shameless.

The other argument was energy security. In a paper I wrote for an NGO (Alternative Forum for Research in Mindanao) also in 1993, on the Apo geothermal development where I looked at the comparative air pollution impacts of the power options for Mindanao and the country, I argued that we could always close local coal mines but make provisions for reopening them when the need arose. That was because, at the time, the tariff protection for the industry was so high and was more than sufficient to make local coal workers rich and also to substantially lower costs for the coal plants at the time. The paper’s assertions were supported with calculations using data from the NPC itself.

Perhaps nowadays, local coal may have improved its position vis-avis imported coal because of some simple technological developments and the rising price of crude oil, but I think the arguments I made are still relevant.

Energy Self Reliance: Viray vs. Velasco

It was with keen interest that I read Dr. Francisco Viray’s review/critique of Mr. Geronimo Velasco’s most recent book on the quest for ‘energy self-reliance’. I must confess I haven’t yet read this book; but I’ve read a much earlier tome by the same author and on the same theme published in the late 70’s.

Viray’s critique---for that is how it should be called---highlights the recurring theme of the proper role of the state in the energy sector, and for that matter, in ‘leading’ sectors of the economy. The quotation marks are motivated by an appreciation of the fact that people tend to think that their sector is always major or leading.

Let me say now that I think that there are major points that Viray really misses. Unfortunately. But let me say too that Velasco’s so-called insights are drivel.

(Allow me this long parenthetical note. Just recently, an analytical report emanating from the Department of Budget and Management urged an urgent review of the Department of Agriculture’s food security objective, saying it was too costly and more to the point, misdirected. It is a point I agree with generally for I have yet to see any evidence that the subsidies really benefit rice farmers and that the tariff protection did not serve only to benefit favored rice importers.

Insofaras the energy sector is concerned, I was really surprised that during a lecture I was privileged to attend, the prominent American energy economist William Hogan made the case that energy should, in the main, be treated as just another commodity for which all social costs should be reflected. He was lamenting the fact that the United States government (or more precisely all American taxpayers) was paying for a very expensive political and defense policy, especially in the Middle East, for which the cost was distributed in a way which did not actually reflect consumption. Think about the war in Iraq! In effect, a private good was being treated as a public good. If the objective were only to address temporary shocks or supply disruptions, one could rely on the Strategic Petroleum Reserve, and charge inventory costs to taxpayers, said.

In his critique, Viray expresses agreement with the objective of ‘self-reliance’ but protests ‘political intervention’ in the affairs of government corporations in the energy sector. Is he saying that the state should give the corporations and the managers the resources and then leave them to their own devices? I think not, for Viray is too intelligent not to know about general political direction and accountability. Mysteriously, Viray speaks of a political context or environment and seems to say that experts (so-called) are always constrained by democratic principles. (I protest dictatorship only if I am not the dictator).

But let us first tackle ‘self-reliance,’ an objective with which he is in agreement with Velasco. Former experts at the corporate planning department of the National Power Corporation and other Philippine energy researchers will surely tell us that this objective is not without costs. Hydro, geothermal, local coal, natural gas etc. are not really the cheapest sources of electric power in any line-up of options. In other words, the objective has imposed and still imposes a cost in addition to lower cost options. I would have no problem with that for as long as these additional costs are properly explained and decided on in the political arena.

Of course, there is a sense in which I am totally in agreement with Dr. Viray. And that is if ‘political’ exclusively meant intervention in the day-to-day management of government corporations in the energy sector and in total disregard of performance and professional management principles. Even Velasco cannot disagree with that but...

Viray quotes Velasco on the fact he (Velasco) was forced to diminish protection for the local coal industry because of the structural adjustment program impositions, mainly of the World Bank and the IMF. As a persistent socialist and qualified nationalist, I would be among the first to protest multilateral impositions; but not when these are essentially correct. I can protest the fact of the imposition but defend its essence. It is a matter of integrity. I can say the ‘enemy’ is absolutely correct in some regard.

Who am I to write all of the above? (Read on).

A year after graduating from the University of San Carlos with a degree in chemical engineering, I joined the National Power Corporation as a chemical analyst for one of the first two power (diesel) barges in the Philippines, anchored in Cebu, in 1991. At the time Secretary Velasco was considered as a god of sorts. We had had training for almost a month when his chopper landed on the premises in Naga just as a super-barge unloaded the power barge straight from Japan.

In the same year I was hailed to the Visayas regional security office of NPC for having spoken at a rally against the notorious Amendment 6, which eventually allowed the dictator to rule by decree even after he had allowed the election of a national assembly in 1978. My interrogator was menacing and a real menace.

In my very short period with the NPC, where I was also assigned to the fuels laboratory serving the first NPC coal power plants (from Romania) I was exposed to all the corruption in procurement. I and another engineer were asked to sign an acceptance report for a hypochlorination plant for the cooling water requirements of the coal plant. We both refused.

Which brings me to this point. How can we assess people like Velasco, who continue to assert virtue?


Later, I joined the Ministry of Energy with the encouragement of someone who had been with the old communist party (but who had been expelled) as still a lowly bureaucrat with the Bureau of Energy Utilization in the Visayas.

In the same year, I was invited by the National Intelligence Security Agency (NISA) for a ‘meeting’ which was actually an interrogation. The agents showed me pictures of protest demonstrations and asked me to explain. At the same time, in the same compound, my girlfriend who happened to work in the same office was also being interrogated in the same compound. Her interrogator was opposite her on a swing, ‘persuaiding’ her to inform on me.

I am sure many Filipinos have similar stories. What should make them special is the willingness and capacity to tell us these now so we will not Velasco and others who came after him escape an accounting.

What follows is Viray's review of Velasco's new book.


It is a dilemma to critique a book authored by someone I worked for and admire as a person but with whom I disagreed with in major policy decisions during my term as Secretary of Energy under the Ramos administration. I can either end up defending myself—which will be construed as a biased critique—or avoid a debate on policy decisions by simply citing the differences in governance during his time and my time. However, such simplistic review would ignore the significance of the management approach and policies that helped the accomplishments cited in the book, which I completely agree with. Not because I worked for the author for some time, but because I was very much involved in the energy industry during my academic career at the University of the Philippines during the Marcos administration.

The book is a good treatise on how to manage government corporations, most especially in the energy industry, which is critical to the life of a country’s economy and the well being of its citizens. The story on Philippine National Oil Company (PNOC), Petron, and National Power Corporation (Napocor) showed that the state has to insulate from political intervention the energy industry’s government corporations if it wants them to accomplish their mission in the interest of national security and price affordability, and if it wants corporations to act as catalyst to support policies on energy development and management. The admission of the author that he would not have done the things he had done without Martial Law attests to this statement (48, 78). He can even get away with so-called anomalous Memorandum of Agreements (141) at the time. Moreover, the success of Petron from which the author inherited personnel with a private culture of efficiency and merit-based recognition compared to the lesser success of Napocor, which was a government corporation from the start, is another testament (140-41).

While I agree that the best way to influence the behavior of players in the market is for government to play a significant role through a full ownership of Petron and Napocor, such role can only be played if it is allowed to be run professionally and freed from political intervention and removed from the rules and regulations of government hiring, salary structures, procurement procedures, and the like (17-19, 205). Note: A lot of good people at Napocor left when it was placed under the Salary Standardization Law of the government.
The mere fact that when the Department of Energy was reinstituted in 1992, Congress inserted a provision whereby the budget of PNOC and Napocor had to be approved by Congress proves that insulating energy corporations from political intervention is easier said than done. Imagine Petron’s budget passing through Congress, its crude oil procurement done through government bidding procedures (19), or Petron being asked by government to subsidize oil prices during periods of crude oil increase just like what was mandated for Napocor. Under our version of a democracy and its resultant political environment, Petron will be bankrupt by now and will thus fail in its obligation that the author stated: “It [Petron] was the most profitable government corporation and thus a valuable source of revenues for government. More important, Petron performed a unique role in stabilizing local oil prices” (177). The author recognized that he could not have insulated Petron from political intervention and government rules and regulations if it were not for Martial Law (29).

I submit that the privatization of Petron and the oil deregulation law are the right policies under the current political environment, but I agree with the author that the government must strengthen its regulatory powers and exercise it to the fullest. Deregulation does not mean no regulation but re-regulation. For starters, one advantage of deregulation would be that all service stations, not only of Petron, would have clean toilets (168).

Congress needs to pass an anti-trust law so that it can strengthen its regulatory mandate in liberalized and deregulated markets. Even if the government has only a 40 percent share in Petron, this can still be used as a policy instrument and exert influence in pricing. However, government would need political savvy in addition to management acumen.

The author admits that during his term, everybody followed Petron when it set the price (194). The same happens in a deregulated environment: Everybody follows the lowest price setter, hence the “same price” situation still prevails, but that same price is the lowest price set by the most efficient. While one is always free to accuse the foreign companies of collusion, I do not think that Petron is a party even with Saudi Aramco as a foreign partner. Otherwise, government itself, which has equal vote in the board, will be a party to a cartel, which it wants to prevent—an irony in its highest degree. The privatization model of Petron achieves the twin objectives of insulating it from political intervention and performing its role as “a potent policy instrument” vis-à-vis major oil industry players.

To be able to perform its role well, Petron had to be financially stable, efficient, and able to compete; but this is possible only if it is insulated from political intervention. Given the current political climate, its privatization, with government retaining 40 percent and the public 20 percent, is the best decision that was made by the Ramos administration.

Likewise, the Philippine Electric Power Industry Reform Act (EPIRA), for all its shortcomings, is a step in the right direction. The government has no money to put into the required expansion program of the power sector, and with political intervention Napocor cannot generate its cash counterpart requirements for the projects (136). Lower interest loans are offset by inefficiency and political interference. EPIRA is a developmental process and the issue of cross-ownership prohibition must come at the right time. For this, government must be constantly at attention to monitor developments on monopolistic behavior. National Transmission Corporation, for instance, must be privatized like the Petron model. It must not be entrusted completely in the hands of the private sector, even in a concessionaire model of privatization.

The author failed to mention that our independent power producer contracts are, in reality, not IPP contracts in the strictest sense, but are Build-Operate-Transfer contracts (a policy embodied in Republic Act [RA] 6957 and RA 7718) wherein the assets will be transferred to the Napocor after the cooperation period. As such, the payments made due to the “take-or-pay” contract, whether used or not, are payments for the capital assets and not for unused fuel or coal because Napocor supplies the fuel. Note that the author’s word is “whether or not the organization needed” (155) instead of used, to which I disagree with because at the time the take-or-pay volume were contracted out, they were based on forecast and therefore were “needed” in the future as forecasted at that time. Unlike a straightforward IPP, the facilities are not transferred to the buying party. So in the BOT projects, payments made if the plants are not used is not wasted because the assets will eventually be owned by Napocor.

Lastly, to say that the post-Marcos administration did not have a comprehensive energy development plan is a sweeping statement. I would like to take exception for the Ramos administration for which I was the Secretary of Energy from September 1994. In fact, the plans and programs of the Ramos administration were built on the achievements mentioned in the book; and the policies, objectives, and basic thrusts were basically maintained (208). Policies on the development of indigenous energy resources and renewable energy and energy conservation were continued. We pursued the implementation of the Malampaya natural gas project, which has enhanced our energy security and independence. We left behind an ocean, solar, and wind pole-vaulting program, which is geared toward developing renewable energy. We had the very successful Power Patrol Project, which involved the participation of the private sector to support the energy conservation policy.

The policy on deregulation and liberalization of the oil and power industry are policies called for in this current form of political governance. Liberalization is not an invention of post-Marcos administrations because as the author wrote, “In 1984, as the country implemented the International Monetary Fund’s structural adjustment program, we [the Marcos administration] had to allow market forces to operate in the coal industry” (65-66). Moreover, the Ramos administration left behind a thirty-five-year Energy Development Plan (1998-2035), which takes off from the accomplishments cited in the book and those done during the Ramos administration.

The Filipino people are now enjoying the fruits of the labor of the author in our quest for energy self-reliance, most especially the geothermal and hydropower development. But while he does not agree with the privatization of Petron, we must realize that Petron’s privatization was successful because it was nurtured and managed well to become a very profitable company during the Marcos administration. While we have yet to see the benefits of the EPIRA, it is too early to pass judgment on policy decisions of post-Marcos administrations on the power sector. Suffice it to say that I agree with the author that the success of deregulating a very critical industry, like oil and power, is a strengthened, responsive, and well-administered regulatory environment. The challenge that lies ahead of us is to be able to duplicate the achievements told in the book in our own version of democracy in which political intervention, not only by the politicians but also by those with self-interests from the private sector and nongovernment organizations, is a commonplace.—Francisco L. Viray, President, Trans-Asia Power Generation Corporation