‘Let There Be Light’

 

September 25, 2022 | 5:14 pm

Introspective By Romeo L. Bernardo

 

As we approach the first 100 days of President Ferdinand “Bongbong” Marcos, Jr.’s term in office, I would like to share my reflections on the priorities of his administration, starting with the country’s energy priorities.

“The availability of cheap, reliable energy” according to President Marcos Jr. is a key component in the administration’s transformation plans for the country. This is essential to fuel an economy that grows at 5-6% per year, and registered 7.8% growth in the first half of 2022.

Getting this right will involve close coordination between the government and the private sector. We must have healthy and capable government institutions led by serious-minded people that will steward energy market improvements, attract new investment, and protect consumers and industry stakeholders.

Thus, in these first 100 days, defining the leadership and the people that will steer the Department of Energy (DoE), the Energy Regulatory Commission (ERC), and other agencies in the energy family are of utmost importance. This is especially true in our current energy context, including the possibility of an energy crisis ahead.

THE STRUGGLE
We find ourselves in a supply and demand situation that is tight. We see yellow and red alerts raised by National Grid Corp. of the Philippines (NGCP) becoming more frequent, with nine alerts so far this year in nine months vs. seven in all of 2021, and just two in 2020. These result from low power reserves and transmission line inadequacies.

We are experiencing the beginning of the end of Malampaya, our only indigenous source of gas. The impact of this may already be felt with the stoppage of dispatch since June of the country’s largest gas plant, the 1200-MW Ilijan Plant, following the contractual termination of a 25-year fuel supply agreement, begun in 1997. A moratorium on coal is also preventing development of new coal power plants; sensible from a climate perspective, challenging for a low-income country trying to promote investment and job creation for its people. We are experiencing renewable and other energy projects curtailed by a lack of transmission capacity. We run the risk of not enough energy supply and transmission capacity to serve the future needs of our country.

As a result of this, customers are experiencing a significant increase in their electric bills, up to 70% in some cases. This is due to an unprecedented rise in the cost of fossil fuels — coal and oil products, which fuel 55% of our power industry. This is driving inflation and creating pressure on the balance sheet of businesses and on the quality of life of people across the country.

Alongside these immediate challenges, the impacts of climate change continue to intensify and affect the Philippines disproportionately. We need to find solutions to decarbonize our energy system, while sustaining the economic prospects of our country. The key challenge facing our new administration is how to balance these two objectives — decarbonizing while promoting economic development — given that renewables today are not yet cheap enough or sufficiently scalable to replace thermal sources.

All in all, our new government has formidable challenges ahead and we must ensure that we have strong government institutions able to tackle them and avert an energy crisis.

NEW HOPE
While I hold these views dear, they are not mine alone. All of us want to see the Philippines on a trajectory that will bring us to upper middle-income status alongside our ASEAN peers.

It is in this context that I would like to highlight a recent declaration from the Management Association of the Philippines (MAP), which expresses support for the new energy leaders. They will be at the forefront of this journey to build up their respective institutions and to carry out their formidable responsibilities as stewards of our energy system.

“MAP welcomes, and fully and wholeheartedly supports the appointments of Sec. Raphael Perpetuo Lotilla as the energy secretary and Atty. Monalisa Dimalanta as Energy Regulatory Commission (ERC) Chairperson.

“Atty. Lotilla has had a distinguished career as a public servant for 22 years in various capacities — ranging from a professor of law in UP to undersecretary for socioeconomic planning at NEDA (National Economic and Development Authority) under three Presidents, President of PSALM (Power Sector Assets and Liabilities Management Corp.) and then Secretary of Energy. In the international area, he had served as Regional Program Director of the Partnership in Environmental Management for the Seas of East Asia under the United Nations and as Philippine consultant on UNCLOS issues, a key nationally strategic concern.

“In the private sector, he has been an independent director in several public-listed conglomerates with diverse interests in power, banking and financial services, food manufacturing and distribution, real estate and infrastructure. More recently, he served as independent director in a power company, representing the interest of minority shareholders and external stakeholders.

“In his long career in public service, it is a matter of record that his performance has been exemplary, and without blemish, marked by objective professionalism, integrity, competence and dedication.

“Atty. Dimalanta has an outstanding career in law practice, primarily in the area of energy and power regulation, culminating in her chairing the National Renewable Energy Board, an institution created by law (Renewable Energy Law) from 2019 to 2021. For three months, until her appointment, she was affiliated with a power company, as head of legal and compliance where her role was primarily to ensure that company is in full conformity with all laws. She has likewise served with utmost distinction in all her work.

“Both Sec. Lotilla and Chairperson Dimalanta graduated from UP for their BA and Law degrees, and from the University of Michigan for their Masters degrees.

“In the less than two months that both Sec. Lotilla and Chairman Dimalanta have been in office, they have demonstrated clear vision and resolute action.”

This message of confidence from the MAP echoes public statements of many other stakeholders of repute including Tony La Viña, dean of the Ateneo School of Government, Jay Layug, president of the Developers of Renewable Energy for Advancement, Inc., and former Energy Undersecretary, ACEN CEO and President Eric Francia, former DoE Secretary Vince Perez, Anne Montelibano of the Philippine Independent Power Producers Association (PIPPA), Senate President Juan Miguel Zubiri, and former Senate Committee on Energy Chairman Win Gatchalian, among many others.

I know Sec. Popo personally as we have worked together in various capacities including as counterpart undersecretaries in the Ramos administration and as co-Fellows of the Foundation for Economic Freedom, an advocacy group for good economic governance. And I can personally attest that he is a true public servant and a capable leader, which is what we need to fix the problems of our current system and prepare us for the future.

These two leaders are in keeping with the excellent appointments of professionals in other key economic agencies — notably the Departments of Finance, Trade and Industry, Budget and Management, Transportation, and Public Works and Highways, NEDA, and the Bangko Sentral ng Pilipinas.

Sec. Lotilla and Chairman Dimalanta have earned the trust of many leaders through their track record of service, fairness, and excellence. I certainly think that they deserve our support and full cooperation to help deliver on the transformation plans of the President in the energy sector. It is a difficult task, but by working together, we will find a way forward towards a future where the availability of cheap, reliable energy is real every day, for every Filipino.

 

Romeo L. Bernardo was finance undersecretary from 1990-96. He is a trustee/director of the Foundation for Economic Freedom, the Management Association of the Philippines, and the FINEX Foundation. He also serves as a board director in leading companies in banking and financial services, telecommunication, energy, food and beverage, education, real estate, and others. globalsourcepartners.com

romeo.lopez.bernard@gmail.com

Canary in the coal mine

September 12, 2022 | 5:55 pm

Introspective By Romeo L. Bernardo

I am pleased to share with readers, our post last Sept. 11 to GlobalSource Partners subscribers. GSP (globalsourcepartners.com) is a New York-based network of independent analysts in emerging market countries. Its subscribers are mostly global banks and fund managers. Christine Tang and I serve as their Philippine Advisers.

Last week, the Senate Blue Ribbon Committee investigating the controversy surrounding the Aug. 9 order of the Sugar Regulatory Administration (SRA) to import 300,000 metric tons of sugar concluded its public hearings. It recommended the filing of administrative and criminal charges against the four officials who signed the importation order, one of whom, an undersecretary in the agriculture department, is the chief of staff of the agriculture secretary, President Ferdinand Marcos, Jr. himself. The President was insulated from the heated arguments.

To recall, the controversy broke when the President, through his spokesperson, denied approving the importation order after it was issued, called it illegal, and rescinded it. The agriculture undersecretary, his chief of staff Leocado Sebastian, promptly asked to be relieved of his duties and the senate probe began soon after. During the hearings, Undersecretary Sebastian testified that he signed the order in good faith, believing that he had authority from the President based on a memorandum from the President’s executive secretary, and that the decision to import the specific volume of sugar is based on data showing the shortage at hand of raw and refined sugar in the domestic market which had been discussed in earlier meetings with the President.

Those in the agriculture community following the whole affair, who know Undersecretary Sebastian to be an honorable man, left it with a bitter taste in the mouth. The sentiment seems to be that not only was the man thrown under the bus, he was demonized, then fed to the wolves. And all for signing off on an importation order that the President himself had since said would be necessary but perhaps at only half the quantity. Seemingly belatedly, the President on Aug. 25 instructed his economic managers, i.e., the secretaries of finance, trade and industry, and socio-economic planning, as well as agriculture officials, to determine the status of domestic sugar supply and the volume of imports needed as well as to find measures to stabilize domestic sugar prices. The findings and recommendations, supposed to be completed in seven working days, have yet to be released to the public. In the meantime, latest data as of August show that the price of sugar and sugar products in consumers’ food basket has surged by 26% year on year.

For many outside observers who are inclined to take Undersecretary Sebastian at his word, the instinct is simply to conclude that cabinet appointees serve at the pleasure of the President. Presidents have multiple political and economic objectives to balance and over the course of history, not a few good men have taken a bullet for their leaders.

However, we cannot help but wonder about this canary in the coal mine, what it says about the President’s leadership/management skills and what signals it sends to the other technocrats in his team, the economic managers included. 

Early on, we had warned of a looming first fumble in the President’s decision to assume the agriculture portfolio,1 and it took less than two months for it to happen. But now, with the unnecessarily shabby treatment of a seemingly well-intentioned, professional civil servant in full public view, what hope is there of the President finding a suitable candidate to head this important department?

As it is, there is the risk, pointed out by the sole dissenter in the senate’s committee report, that the treatment of Undersecretary Sebastian “discourages government officials from acting with urgency on matters that affect consumers, like tight supply, high prices and inflation,” and that agriculture “officials are now gun-shy about signing any importation documents… further exacerbating the food shortage.”2

Those with a broader outlook fear the incident’s chilling effect on other professional managers in the President’s newly formed cabinet that, at a minimum, could dampen enthusiasm and performance.

Coincidentally, a rumor appeared last week in the country’s leading newspaper of a “reluctant” finance secretary who would prefer to return to the BSP (Bangko Sentral ng Pilipinas) next year.3 True? Hard to say. But we wonder whether this is one technocrat’s way of signaling to the President that whatever difficulties political considerations bring, the professionals who are bringing much-needed credibility to his administration, deserve better treatment.

1 See GS Brief, “Bold or ill-advised?,” June 22, 2022

2 https://www.einnews.com/pr_news/589931967/statement-of-senator-risa-hontiveros-on-the-blue-ribboncommittee-report-on-sugar-fiasco

3 https://business.inquirer.net/360744/biz-buzz-reluctant-economic-manager

 

Romeo L. Bernardo was finance undersecretary from 1990-96. He is a trustee/director of the Foundation for Economic Freedom, Management Association of the Philippines, and FINEX Foundation.

globalsourcepartners.com