The SC on Meralco rate hike, Bidenflation and Peso depreciation

* My column in BusinessWorld last July 11.
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A number of interesting developments happened last week. I will discuss three of them.

THE SC RULING ON MERALCO RATE HIKE

On July 4, the Supreme Court (SC) upheld the Meralco rate hike of December 2013 and allowed it to collect a staggered amount of P22.64 billion, and junked the petition by Bayan Muna and the National Association of Electricity Consumers for Reforms (Nasecore) which argued there was lack of due process in the Energy Regulatory Commission’s (ERC) approval of the power rates increase.

In 2013, the ERC approved a staggered increase of P7.67 per kilowatt hour (kWh) for the December 2013 billing of Meralco consumers and ordered an additional P1/kWh increase in the February 2014 billing. These were not implemented after the SC issued an indefinite temporary restraining order (TRO) on April 22, 2014.

The SC was wrong in issuing such a TRO, wrong in doing price control and intervention. Recall that many power plants had planned or scheduled maintenance shutdowns from October to December 2013. The Malampaya gas field had a scheduled maintenance shutdown in mid-2013 but the Department of Energy (DOE) requested that it postpone this to late 2013 due to the May 2013 elections. Then a number of old plants had unplanned or unscheduled extended shutdowns, resulting in a huge power undersupply.

But power demand was high in 2013. GDP growth that year was 6.8%, of which investment growth was 18.4%. Peak demand growth in the Luzon grid was 5.3% that year, and yet the combined power under-generation was 5,000 MW comprising 39% of total installed capacity in Luzon (Table 1).

So Meralco and many other distribution utilities and electric cooperatives in Luzon had to source more power from the Wholesale Electricity Spot Market (WESM) at higher prices due to the very tight supply and very thin reserves. Yes, higher power prices are bad, but power blackouts are worse. And if people think that “blackout if power rates do not adjust” was just blackmail in 2013-2014, then consider these recent reports in BusinessWorld this year:

“NGCP declares 2 yellow alerts over Luzon grid” (July 5),

“Power outage leaves Panay, Guimaras in darkness” (July 6),

“Businesses concerned over rising electricity rates” (July 7).

It is already 2022 and the threats of blackouts remain until now. Power supply is tight and reserves thin as demand for power is rising as the economy recovers from two years of lockdown from the COVID-19 pandemic.

It is good that the SC has realized the mistake it made eight years ago and upheld the electricity rate hike. Good decision. And I hope that the SC will avoid the same problem of price intervention in the future, whether in electricity, food, transportation, and other sectors.

BIDENFLATION, NOT PUTINFLATION

There is a continuing narrative that the high inflation in the US, Europe, and rest of the world is “Putin caused” via Russia’s invasion of Ukraine last February. This is not true; this is a dishonest narrative. The truth is that from January 2021 to January 2022, 12 months of US President Joseph R. Biden’s being in power and prior to the Russian invasion of Ukraine, the inflation rates in the US and Europe had been rising fast (Table 2).

I arranged the countries into four groups: A is North America, B is Europe, C is North Asia, and D is ASEAN. Other countries do not have June 2022 inflation numbers yet as of this writing.

So, the Philippines’ 6.1% inflation rate in June, a four years-high, was bad — but it was not as bad as other countries, especially in North America and Europe. Bidenflation policies like reducing US fossil fuel production, increased money printing and government spending are the main causes of high global inflation, exacerbated by the Russia-Ukraine war and strong economic sanctions against Russia....