PGMA's Speech during the Launching of the 10-Point Plan of the Wholesale Electricity Spot Market (WESM)

PGMA's Speech during the Launching of the 10-Point Plan of the Wholesale Electricity Spot Market (WESM)

Heroes Hall, Malacanang (28 June 2002)

GOOD AFTERNOON LADIES AND GENTLEMEN OF THE POWER SECTOR INDUSTRY. PLEASE SIT DOWN. AND THROUGH YOU THE REST OF THE PEOPLE OF THE PHILIPPINES. HEADLINES ARE ALWAYS ABOUT POLITICS, BUT MY WORK IS FOCUSED ON TWO IMPORTANT THINGS -- I'VE SAID, HOW TO SQUEEZE BLOOD FROM STONE, WHICH MEANS HOW TO BRING DOWN THE POWER RATE SOME MORE. AND THE OTHER ONE IS HOW TO ADDRESS THE PROBLEM OF PEACE AND ORDER.

ON THE PROBLEM OF PEACE AND ORDER, WE ARE NOW HAVING A MAJOR BATTLE IN SULU, IN PATIKUL, RIGHT IN THE CAMP WHERE THE ABU SAYYAF WAS BORN WAY BACK IN 1995. THIS IS WHERE JAPILON IS AND THIS IS WHERE JANJALANI IS PROBABLY HIDING TODAY. AND I BELIEVE WE HAVE OVERRUN FOUR CAMPS ON THE WAY TO THE MAIN CAMP SO THAT'S ONE OFFENSIVE THAT'S GOING ON AND LET'S WISH OUR SOLDIERS WELL.

ON THE NPA FRONT, A MAJOR TRAINING CAMP IS ALSO THE SUBJECT OF AN OFFENSIVE IN PALAUIG, IN ZAMBALES. AND YOU KNOW ABOUT THE REVAMP GOING ON IN THE PNP. I WOULD LIKE TO SAY THAT THE PRINCIPLE OF COMMAND RESPONSIBILITY WAS APPLIED STRICTLY ON THE ISSUE OF ILLEGAL GAMBLING. THIS A DRESS REHEARSAL AS FAR AS I'M CONCERNED FOR APPLYING THE RULES OF COMMAND RESPONSIBILITY MORE STRICTLY ON THE MORE CHALLENGING ISSUES OF KIDNAPPING AND DRUGS.

NOW, ON THE POWER SECTOR REFORM AND HOW TO BRING DOWN ELECTRICITY RATE SOME MORE, WHICH I SAID IS LIKE SQUEEZING BLOOD FROM STONE, BUT WE'VE GOT TO TRY. FIRST, LET ME GIVE YOU A BRIEF ON WHAT WE HAVE DONE SO FAR. WE HAVE CREATED THE TRANSCO, THE PSALM. THE TRANSCO IS THE TRANSMISSION COMPANY WHICH OWNS THE TRANSMISSION LINES. IT IS A MONOPOLY, TO REMAIN A MONOPOLY BUT A REGULATED ONE AND IT WILL BE PRIVATIZED AND CONTINUED TO BE REGULATED EVEN WHEN IT IS PRIVATIZED. WE HAVE CREATED THE PSALM -- P-S-A-L-M -- STANDING FOR THE POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION. THIS IS THE NEW THING IN THE FINANCIAL WORLD AFTER THE 1997 ASIAN CRISIS -- ASSET MANAGEMENT COMPANIES TO TAKE CARE OF NON-PERFOMING ASSETS AND DISPOSING THEM IN THE MOST EFFICIENT WAY. AND THIS IS WHAT PSALM IS DOING FOR THE NON-PERFORMING ASSETS OF THE POWER SECTOR.

WE HAVE RECONSTITUTED THE ENERGY REGULATORY COMMISSION. WHAT USED TO BE THE ERB IS NOW THE ERC -- MORE INDEPENDENT, NOT IN-CHARGE OF CONTROLLING RETAIL PRICES EXCEPT FOR TRANSMISSION, BUT WITH THE POWER TO REVIEW PPAs COST STRUCTURES AND INTRODUCE TRANSPARENCY IN THE PRICING SCHEME IN THE POWER SECTOR. WE HAVE ALSO PROMULGATED THE IMPLEMENTING RULES AND REGULATIONS TO THE POWER ACT, THE GRID CODE AND THE DISTRIBUTION CODE WHICH IS NEEDED BY OUR INVESTORS, BECAUSE WE ARE SELLING TRANSCO TO OUR INVESTORS, WE'RE SELLING THE POWER GENERATING COMPANIES TO THE INVESTORS. I HAVE ALSO ISSUED AN EXECUTIVE ORDER ON TAX EQUALIZATION. THIS WAS A REQUIREMENT BY SENATE IF WE WANTED TO GET THE POWER SECTOR REFORM LAW THROUGH.

TWO DAYS AGO, THE ERC PROMULGATED ITS DECISION ON NAPOCOR's PETITION FOR UNBUNDLING. NAPOCOR WAS ASKING FOR A 17-CENTAVO INCREASE IN ITS RATES. THE ERC INSTEAD SAID THAT IT MUST REDUCE ITS RATES BY 6 CENTAVOS, AND I AM ORDERING NAPOCOR TO FOLLOW THAT. NOT WITHIN 30 DAYS A NEW SUBMISSION BUT IF THEY CAN FOLLOW IT WITHIN 6, WITHIN ONE WEEK THEN THEY SHOULD DO IT. SO WE CAN GET MORE RELIEF. PRESIDENT KILALA IS NODDING.

TODAY, WE WILL PROMULGATE THE RULES OF THE WHOLESALE ELECTRICITY SPOT MARKET. AND SO, RATHER THAN I WILL SPEND... DO MY SPEECH EXPLAINING WHAT IS THE WHOLESALE ELECTRICITY SPOT MARKET, ANOTHER NEW TERM -- WE ALREADY HAVE THE PPA, PSALM, TRANSCO, ERC -- NOW IT'S... I DON'T KNOW WHAT WE'LL CALL IT, WESM? SINCE THAT'S ONE OF OUR TEN POINTS IN OUR COMPREHENSIVE PROGRAM TO SQUEEZE BLOOD FROM STONE, WE MIGHT AS WELL DISCUSS IT IN TERMS OF WHAT THIS 10-POINT PROGRAM IS ALL ABOUT.

NOW, MAY I SUMMARIZE THE 10-POINT PLAN TO REDUCE POWER RATES AND MAKE THEM MORE COMPETITIVE.

FIRST, WE WANT TO REFLECT THE TRUE COST OF SERVICE. IN LAYMAN'S LANGUAGE, I THINK WE HAVE SEEN THAT HAPPENING WITH WHAT ERC DID WITH THE UNBUNDLING OF NAPOCOR AND WITH THE CEASE AND DESIST ORDER TO MERALCO SOMETIME AGO WHICH HAS RESULTED NOW IN LOWER ELECTRICITY RATES THIS MONTH. AND NEXT MONTH, WE WILL SEE FURTHER REDUCTION OF ELECTRICITY RATES BECAUSE OF MY INSTRUCTION TO NAPOCOR OF LAST MAY 8. UNDER THIS FIRST POINT, WE SHALL ENSURE THAT THE CONSUMERS ARE ONLY CHARGED THE TRUE AND FAIR COST OF ELECTRIC SERVICES, AND ONLY FOR POWER SERVICES THEY HAVE ENJOYED AND USED. WELL, FOR ONE THING, ONE OF THE THINGS THAT ERC DISALLOWED IN TERMS OF NAPOCOR IS THAT WE DON'T USE THE APPRAISED VALUE OF THE ASSETS FOR PURPOSES OF COMPUTING DEPRECIATION, COST... RESOURCE BASED. WE USE THE PURCHASE VALUE SO THAT THEY DON'T MAKE MONEY TWICE. THEY ALREADY MAKE MONEY ON DEPRECIATION. THEY SHOULDN'T USE THAT AS PART OF THE BASE FOR HOW TO COMPUTE THE RATE OF RETURN. OR WE SHALL ELIMINATE CHARGES FROM ONEROUS CONTRACTS. THAT'S WHY WE NEED TO REVIEW THE IPP CONTRACTS AND OTHER CONTRACTS AS WELL THAT THE ERC IS STUDYING AND REGULATORY LOOPHOLES. I'LL GIVE YOU AN EXAMPLE OF A LOOPHOLE THAT THE ERC WAS ABLE TO PLUG -- THE VALUATION OF ASSETS, THE APPRAISAL OF ASSETS. ACQUISITION RATHER THAN MARKET CHANGES IS THE BASE FOR VALUATION OF ASSETS, AND THAT HAS HELPED BRING DOWN WHAT NAPOCOR SHOULD CHARGE FOR AN INCREASE OF 17 CENTAVOS TO A DECREASE OF 6 CENTAVOS.

SECOND OF OUR TEN IS TO INTRODUCE A "DECLINING BLOCK" RATE STRUCTURE. VINCE PEREZ HAS ALREADY SPOKEN ABOUT THIS. IT HAD... IT WAS HEADLINE NEWS IN THE BUSINESS FRONTPAGE OF THE BULLETIN. WHAT'S THE MEANING OF THIS? WE SHALL INTRODUCE SPECIAL PRICING INCENTIVES FOR LARGE CONSUMERS OF ELECTRICITY ESPECIALLY BUSINESS AND INDUSTRIES TO REDUCE THE COST OF OVERCAPACITY AND IN THE PROCESS ALSO ENCOURAGE EXPANSION IN MANUFACTURING AND COMMERCE. MEANING, FOR THE FIRST, I DON'T KNOW, 100 KILOWATT PER HOUR YOU CHARGE A RATE FOR THE NEXT 100 KILOWATT PER HOUR. AH, NO, NO, FOR THE FIRST HUNDRED KILOWATTS YOU CHARGE SO MUCH, FOR THE NEXT HUNDRED KILOWATTS OR SO YOU CHARGE A LOWER RATE. SO THE MORE THEY USE THE LESS UNIT COST THEY PAY, THEREFORE, IT WILL BE CHEAPER TO PRODUCE MORE PRODUCTS. ALSO, THEREFORE, THEY WILL USE MORE ELECTRICITY AND THAT WILL REDUCE THE EXCESS CAPACITY WHICH IS THE SOURCE OF THE PPA.

THIRD IS THAT WE WILL OPTIMIZE THE UTILIZATION MIX OF NPC POWER PLANTS. WHAT WE MEAN HERE IS THAT -- AGAIN, LAYMAN'S LANGUAGE. THE EXPERTS WILL FORGIVE ME FOR INACCURACIES BUT WE HAVE TO EXPLAIN THIS IN LAYMAN'S TERMS AT THE COST OF SOME ACCURACY -- THERE ARE DIFFERENT POWER PLANTS, DIFFERENT FUEL MIXES WITH DIFFERENT COST, DIFFERENT EFFICIENCIES. AND LET'S SAY, FOR INSTANCE, MAYBE IN THE DAYTIME WE USE MORE; IN THE NIGHTTIME WE USE LESS. SO IN THE NIGHTTIME, WHAT WILL BE THE SOURCE OF POWER? WE SHOULD USE, WE SHOULD GET IT FROM THE PLANTS THAT COST LESS, NOT FROM THE PLANTS THAT COST MORE. SO WE HAVE TO FIND OUT THE DIFFERENT EFFICIENCIES OF THE DIFFERENT PLANTS. AND THIS REQUIRES A LOT OF HOMEWORK AND I INTEND TO STAY PUT IN MALACA„ANG TO HELP DO THAT HOMEWORK.

WE WILL OPTIMIZE THE UTILIZATION MIX AND DISPATCHING PRIORITIES OF NAPOCOR POWER PLANTS IN WAYS THAT RESULT TO LOWER BLENDED COSTS. THAT'S THE MEANING OF THAT IN TECHNICAL TERMS.

FURTHER, WE SHALL REVIEW AND UPGRADE THE COUNTRY'S POWER DEVELOPMENT PLAN TO BETTER DISTRIBUTE GENERATION CAPACITY IN RELATION TO LOAD CENTERS, UPGRADE OUR TRANSMISSION SYSTEM AND MINIMIZE THE VULNERABILITY OF THE POWER GRID FROM BLACKOUTS. REMEMBER WHAT HAPPENED TO THE LAST TWO BLACKOUTS, PART OF THAT IS THE RESULT OF NOT KNOWING WHICH ONES TO TURN ON, WHICH ONES TO TURN OFF, etc. SO WE HAVE TO... AND IF WE ARE GONNA LOOK AT THE WHOLE POWER SECTOR DEVELOPMENT PLAN AND REVIEW IT, I WILL LEAD THAT REVIEW. SO PLEASE, THOSE WHO WANT TO INVITE ME TO SPEAKING ENGAGEMENTS, SPARE ME BECAUSE I NEED THE TIME TO READ THE DEVELOPMENT PLAN INSTEAD AND REDO IT.

THIS WILL INCLUDE THE TRANSFER OF POWER BARGES AND MATURED B-O-T PLANTS TO REGIONS WHERE THEY CAN BE BETTER UTILIZED AND THE ENHANCEMENT OF NAPOCOR GENCO'S BY PROVIDING THEM WITH BETTER MARKETS AND QUALITY SUPPLY CONTRACTS. THE EASIEST OF COURSE TO TRANSFER WILL FIRST BE THE POWER BARGES. THEY'LL BE TRANFERRED WHERE THERE IS OVERSUPPLY TO WHERE THERE IS UNDERSUPPLY. AND WE MAY EVEN TRANSFER LAND-BASED PLANTS AS WELL.

NEXT, SLIDE NUMBER 7. WHAT NUMBER IS THAT? IT'S BY SLIDES NOT BY THE NUMBER. OKAY, NEXT ONE OF THE 10 POINTS. ACCELERATE OPERATION OF THE WHOLESALE ELECTRICITY SPOT MARKET. AND THAT'S WHAT WE ARE DOING TODAY. ACTUALLY, WE ARE LATE, THE DEADLINE FOR THIS IS END OF THIS MONTH. SO, WE ARE JUST PUTTING UP THE RULES. SO WE'RE LATE, I WANT TO ACCELERATE THIS. I UNDERSTAND THAT WITHIN THE ERC IT'S OLIVER WHO IS IN-CHARGE OF WORKING ON THIS. SO, I'LL WORKED WITH HIM SO WE CAN SPEED IT UP.

WE WILL PROMOTE THE EARLY ESTABLISHMENT OF A COMPETITIVE WHOLESALE ELECTRICITY SPOT MARKET. WHAT WILL THIS DO? IT WILL PROVIDE A TRADING PLATFORM FOR POWER PRICE COMPETITION AND GIVE POWER USERS A FAIR AND TRANSPARENT WAY TO DETERMINE REALISTIC POWER COSTS.

OH, TELL ME VINCE IF I'M PUTTING IT THE RIGHT WAY. YOU KNOW CHINA, CHINA OWNS MOST OF THE COMPANIES IN CHINA, STATE-OWNED. BUT EACH COMPANY IS MANAGED AS ITS OWN PROFIT CENTER AND COMPETES WITH OTHER COMPANIES. NAPOCOR OWNS ALL THESE POWER-GENERATING COMPANIES RIGHT NOW, AND DECISIONS ARE MADE IN NAPOCOR. WHAT WE WILL DO IS MAKE EACH ONE OF THESE COMPANIES A UNIT IN ITSELF, MANAGED IN ITSELF IN COMPETITION WITH OTHER UNITS. AND THEY WILL DO THEIR INDEPENDENT PRICING SCHEMES ACCORDING TO THEIR OWN COST STRUCTURES, AND THEN THEY WILL COMPETE IN THE SPOT MARKET. AGAIN, AT THE RISK OF BEING INACCURATE BUT SO SOMEHOW THE PUBLIC WILL UNDERSTAND WHAT SOME OF THESE GOBBLEDYGOOK CAN MEAN. I DON'T KNOW IF THIS IS THE RIGHT PLACE TO PUT IT BUT YOU KNOW AGAIN, I TALKED ABOUT DAYTIME DEMAND, NIGHTTIME DEMAND. YOU HAVE DIFFERENT LEVELS OF DEMAND AND THEREFORE YOU CAN HAVE DIFFERENT SPOT PRICES. AND SO, THIS IS WHAT WE SHOULD BE DOING. AND SO THIS IS PART OF THE REFORMS TO BRING DOWN ELECTRIC RATES.

NEXT OF THE 10 POINTS IS TO ACCELERATE IMPLEMENTATION OF 'OPEN ACCESS.' 'OPEN ACCESS' MEANS THAT THE BIG BUYERS, THOSE WHO BUY MORE THAN WHAT? ONE MEGAWATT OF ELECTRICITY, CAN CHOSE WHICH GENERATING PLANT THEY WANT TO BUY IT FROM, OR WHICH POWER COMPANY THEY WANT TO BUY IT FROM. OF COURSE EVERYBODY GOES TO THE ONE TRANSMISSION LINE. SO YOU JUST PAY A TOLL FEE FOR THE ONE TRANSMISSION LINE. BUT DIFFERENT COMPANIES CHARGE DIFFERENT RATES SO YOU CAN CHOSE FROM THEM, THAT'S THE MEANING OF 'OPEN ACCESS.'

THE LAW SAYS THAT WE SHOULD DO THIS WITHIN 4 YEARS. BUT DEPENDING ON HOW THE INDUSTRY PLAYERS ARE WILLING TO DO IT, WE COULD ACCELERATE THIS. BECAUSE CONSUMER CHOICE WILL CERTAINLY PROVIDE FOR GREATER COMPETITION AND LOWER PRICES. SO WE WILL ACCELERATE MEANINGFUL 'OPEN ACCESS' TO GIVE END-USERS THE FREEDOM OF CHOICE IN THEIR POWER SUPPLIES. CORRESPONDINGLY, WE SHALL PROVIDE THEM WITH THE GENUINE SUPPLIER ALTERNATIVE THROUGH COMPETITION AND ENCOURAGEMENT OF NEW PLAYERS IN THE ELECTRIC INDUSTRY POWER SECTOR.

I UNDERSTAND -- BUT I WILL STILL TALK TO THE MERALCO EXECUTIVES. UNFORTUNATELY, CHITO FRANCISCO AND THE LOPEZES ARE OUT OF THE COUNTRY -- BUT I UNDERSTAND THAT THEY ARE WILLING TO PROVIDE 'OPEN ACCESS' EVEN IF THAT MIGHT MEAN A LOSS OF MARKET FOR THEM AS LONG AS WE ALSO REMOVE CROSS SUBSIDIES.

NOW I ASK NAPOCOR AND DOE, HOW WILL THE POWER RATES LOOK IF WE REMOVE CROSS SUBSIDIES? AND WHEN THEY SHOWED ME THE NUMBERS I SAW THAT LUZON IS SUBSIDIZING THE VISAYAS. AND IF WE REMOVE CROSS SUBSIDIES AT THIS TIME THE VISAYAS WILL SUFFER AN EXTRA WHAT? ONE PESO PER KILOWATT HOUR INCREASE. SO, WE STILL HAVE TO HAVE LUZON CONTINUE TO SUBSIDIZE THE VISAYAS BUT FOR THE MOMENT, BUT WE MUST WORK TO MAKE THE VISAYAS POWER SECTOR MORE EFFICIENT. WE HAVE TO FIND OUT WHAT MAKES THE VISAYAS POWER SECTOR LESS EFFICIENT THAN LUZON. AND IF WE CAN WORK ON THAT THEN WE CAN REMOVE CROSS SUBSIDIES. BECAUSE IT WOULD NOT MAKE THE VISAYAS SUFFER SO MUCH, AND THEN WE CAN BRING IN 'OPEN ACCESS.' SO THIS IS PART OF WHAT I WILL STUDY. SO, RATHER THAN GOING TO THE VISAYAS, I WILL STAY IN MALACA„ANG AND STUDY THE VISAYAN POWER SECTOR.

NEXT OF THE 10 POINTS IS TO PROMOTE EFFICIENT PERFORMANCE OF DISTRIBUTION UTILITIES. PROMOTE THE EFFICIENT AND COMPETITIVE OPERATIONS OF FRANCHISE HOLDERS OF ELECTRIC DISTRIBUTION UTILITIES BY PRESCRIBING MEASURABLE STANDARDS OF CONSUMER SERVICE. WE WILL SHIFT TO NEW RATE SETTING METHODS THAT BETTER PROTECT CONSUMERS, ASSURE INTEGRITY IN PROCEDURES, AND CLOSE ALL LOOPHOLES WITHOUT NECESSARILY DENYING THE UTILITIES RIGHT TO EARN THE LEGAL AND FAIR RETURN FOR THEIR INVESTMENT AND SERVICES.

WHAT'S THE MEANING OF THIS FOR A LAYMAN? AGAIN, RIGHT NOW IT'S RATE ON RETURN BASE -- COST PLUS HOW MUCH THEY'RE ALLOWED TO EARN. IF THEY'RE COSTLY, YOU JUST ADD WHAT THEY ARE ALLOWED TO EARN. SO, IN THAT SENSE IF THAT'S THE RATE STRUCTURE THERE'S LITTLE INCENTIVE TO REDUCE THEIR COST. BUT IF WE BEGIN TO LOOK AT THE LOOPHOLES IN THE COST STRUCTURE THEN WE BEGIN TO GO TO PERFORMANCE. AND WE HAVE TO DO A LOT OF BENCHMARKING HERE. WHAT ARE THE MOST EFFICIENT FIRMS? WHAT'S THEIR COST STRUCTURE LIKE? WHAT'S THEIR CAPITAL EXPENSE PER NUMBER OF CONSUMERS? WHAT'S THEIR OVERHEAD EXPENSE PER NUMBER OF CONSUMERS? HOW MANY EXECUTIVES WITH FAT SALARIES DO THEY HAVE PER NUMBER OF CONSUMERS? YOU KNOW, THESE ARE THE THINGS THAT WE HAVE TO LOOK AT, AND AS I SAID, TO HELP SPEED IT UP I'M WILLING TO LOOK AT THOSE COST STRUCTURES MYSELF AS WELL.

THEN ANOTHER OF THE MEASURES OF THE 10 POINTS IS STRENGTHEN AND CONSOLIDATE ELECTRIC COOPERATIVES.

WE HAVE TO SEEK LONG-TERM SOLUTIONS TO PROBLEMS OF RURAL ELECTRIC COOPERATIVES AND STRENGTHEN THEM AS DISTRIBUTION UTILITIES IN PREPARATION FOR DEREGULATION AS MANDATED BY THE ELECTRIC P0WER INDUSTRY REFORM ACT. IT IS HOPED THAT STRENGTHENED ELECTRIC COOPERATIVES WILL BE ABLE TO BRING DOWN RETAIL ELECTRIC'S RATES IN THE RURAL AREAS.

AGAIN, JUST TO GIVE AN EXAMPLE. TELL ME IF I'M RIGHT, FATHER SILVA. IN LEYTE THEY ARE COMPLAINING, THERE ARE SOURCE OF INDIGENOUS POWER HOW COME THEY PAY HIGHER POWER RATES. WELL, NUMBER ONE, BECAUSE THE POWER COMING FROM LEYTE IS MORE EXPENSIVE THAN THE POWER COMING FROM LUZON, RIGHT VINCE? BUT NUMBER TWO, BECAUSE THE ELECTRIC COOPERATIVES IN LEYTE ARE NOT EFFICIENT. SO WE HAVE TO DO SOME DRASTIC MEASURES. WE HAVE TO CONSOLIDATE. WE HAVE TO CONSOLIDATE ELECTRIC COOPERATIVES GOING TO THE VISAYAS. WE HAVE TAKEN OVER THE AKELCO, HAVE WE NOT? BECAUSE IT WAS INEFFICIENT. IT EVEN ENDED UP WITH THE POWER BEING CUT-OFF. BUT WE JUST HAD TO DO IT EVEN TOURIST WERE THERE TO DRIVE HOME THE POINT THAT WE HAVE TO MAKE THE AKLAN ELECTRIC COOPERATIVE EFFICIENT. WE HAVE TAKEN OVER ALSO THE BASILAN ELECTRIC COOPERATIVE, WHY? THAT BIG FIRE IN BASILAN WHICH INCIDENTALLY... IN THAT SQUATTER AREA WHERE INCIDENTALLY A LOT OF ABU SAYYAF'S LIVE AND SOME OF THEM WERE VICTIMIZED. WHY DID THAT FIRE HAPPEN? BECAUSE ELECTRICITY IN BASILAN FLUCTUATE. I KNOW THAT BECAUSE WHEN I SPENT THE NIGHT IN LAMITAN, IN THE CONVENT, ELECTRICITY WAS FLUCTUATING THAT NIGHT -- SOMETIMES IT WAS ON, SOMETIMES IT WAS OFF. MINUTES ON - OFF. AND, SO WHAT THE PEOPLE IN THE SQUATTER AREAS DID WAS THAT THEY JUST HAD CANDLES. AND OF COURSE WHEN YOU HAVE A CANDLE IN A SHACK IT'S VERY EASY TO START A FIRE. SO, BASELCO HAS BEEN TAKEN OVER ALSO BY THE ELECTRIC ADMINISTRATION, NEA.

I'LL GIVE ANOTHER EXAMPLE, NEGROS. NOT ALL THE ELECTRIC COOPERATIVES THERE ARE EFFICIENT. THEY'LL HAVE TO BE CONSOLIDATED AND MAYBE WE MAKE THE MOST EFFICIENT ONE RUN THE REST. FORGIVE ME FATHER FOR PRE-EMPTING YOUR JOB BUT FROM WHAT I'VE SEEN, FOR INSTANCE, MAYBE THE ONE THAT THAT'S IN KABANGKALAN IS THE MOST EFFICIENT. SO, THEREFORE... AHA! YOU SEE, I'M RIGHT. THANK YOU, FATHER FOR AFFIRMING ME. SO, THEREFORE, MAYBE THAT ELECTRIC COOPERATIVE SHOULD BE THE ONE TO RUN THE REST OF NEGROS. THESE ARE GONNA BE DIFFICULT TO DO BUT I WILL OVERSEE THEM TO MAKE SURE THEY'RE DONE.

TODAY I HAD A CALL FROM NORTHERN SAMAR. 'CAUSE THAT'S ALSO ELECTRIC COOPERATIVE, RIGHT? BECAUSE APPARENTLY THERE'S A REQUEST FOR UNBUNDLING. I MEAN, OF COURSE, ERC HAS TO DO ALL THE UNBUNDLING BUT THE NORTHERN SAMAR UNBUNDLING COMES WITH AN INCREASE, PROJECTED INCREASE OF TWO PESOS PER KILOWATT HOURS. SO THE OPPOSITORS ARE TELLING ME, PLEASE DON'T CONDUCT ANYMORE HEARINGS. WE DON'T WANT UNBUNDLING IF ITS GONNA GIVE US AN INCREASE OF TWO PESOS PER KILOWATT HOUR. WELL, I CANNOT TELL THE ERC WHAT TO DO, I CAN ONLY PROPOSE. AND I WOULD PROPOSE THAT INSTEAD OF HAVING FURTHER HEARINGS, LOOK AT THE COST STRUCTURE, EXAMINE IT. AND I'M GONNA ASK DOE ALSO TO DO IT AND NEA. BECAUSE IF NAPOCOR FROM ITS 17-CENTAVO REQUESTED INCREASE ACTUALLY CAN BRING DOWN ITS CHARGE BY 6 CENTAVOS, I THINK THE TWO PESOS INCREASE THAT WHATEVER NORTHERN SAMAR ELECTRIC COOPERATIVE IS ASKING FOR COVERS A MULTITUDE OF SINS THAT SHOULD BE UNCOVERED. SO I'M GOING TO ASK VINCE PEREZ AND NEA TO LOOK AT THAT, OKAY. SO MUCH FOR THE ELECTRIC COOPERATIVES.

THE OTHER ON THE 10-POINT PROGRAM IS TO REVIEW THE IPP CONTRACTS AND SEEK TO REDUCE CONTRACT COSTS.

WE ARE SUPPOSED TO COMPLETE THE REVIEW OF NAPOCOR's IPP CONTRACTS AT THE END OF THIS MONTH. NOT ALL OF THEM WILL BE COMPLETED. WE'RE LATE, BUT I SAID WHATEVER IS COMPLETED MUST ALREADY BE SUBMITTED SO THAT WE CAN BEGIN THE RENEGOTIATIONS.

SO, WE WILL REVIEW THE CONTRACTS AS OPERATING AGREEMENTS BY BENCHMARKING FOR COMPETITIVENESS, FAIRNESS AND ONEROUSNESS IN THE CONTEXT OF WHEN THE CONTRACTS WERE SIGNED. I MENTIONED BENCHMARKS EARLIER, SUCH BENCHMARKS SHALL BE BASED ON LEGAL, FINANCIAL AND TECHNICAL STANDARDS. WE WILL REDUCE THE STRANDED COST THROUGH THE RENEGOTIATION, RESTRUCTURING, OR NON-RENEWAL OF NAPOCOR's IPP CONTRACT AS MAY BE NECESSARY. AND AGAIN, I TOLD VINCE IF THE OTHER SIDE IS HARDBALLING CALL ME AND I'LL SIT IN THE NEGOTIATIONS.

ANOTHER ONE OF THE 10 P0INTS IS TO EXPLORE FINANCIAL ENGINEERING METHODS, WHICH WE HAVE ALREADY BEEN DOING. THAT'S WHY WE ARE ABLE TO REDUCE NAPOCOR's PPCA TO 40 CENTAVOS WHICH WILL BE SEEN IN YOUR BILLS BY NEXT MONTH.

THIS MEANS EXPLORING ALL FINANCIAL ENGINEERING METHODS TO REDUCE THE BURDEN OF THE REMAINING STRANDED COST ON THE CONSUMERS WITHOUT UNDULY AFFECTING THE DEVELOPMENT AND PRO-POOR PRIORITIES OF OUR NATIONAL BUDGET. WHICH MEANS THAT THIS THING ABOUT WHAT? PASSING ON THE COST TO THE PEOPLE. THAT'S NOT A GOOD ARGUMENT AGAINST IT. BECAUSE WHAT WE WILL DO MUST STILL BE WITHIN BUDGET DEFICIT CEILINGS. AND IN ANY CASE, IF YOU DON'T DO THIS, YOU WILL PASS ON THE COST TO THE PEOPLE ANYWAY BY HIGHER STRANDED COSTS.

THEN, FINALLY AND THIS IS NUMBER 10. WE WILL HELP ENHANCE THE INSTITUTIONAL CAPABILITY OF THE ENERGY REGULATORY COMMISSION.

WE ENCOURAGE THE ERC TO ASSERT ITS MANDATE THAT'S WHY, AS I SAID, WE CAN NEVER TELL THEM WHAT TO DO. WE CAN ONLY PROPOSE. IT IS LIKE OUR RELATIONSHIP WITH THE CENTRAL BANK -- WE RESPECT THEM, WE ENCOURAGE THEM. WE ENCOURAGE THE ERC TO EXCERCISE ITS MANDATE AND BROAD REGULATORY POWERS TO CORRECT THE ERRORS OF THE PAST, ASSURE A MORE ORDERLY UNBUNDLING OF RATES AND TRANSITIONING TO A DEREGULATED SYSTEM, PROMOTE A COMPETITIVE ENERGY SECTOR, AND ESTABLISH SAFEGUARDS AND CLEAR RULES SO THAT THE ELECTRIC CONSUMERS ARE PROTECTED.

THESE THEN ARE OUR TEN POINTS TO TRY TO SQUEEZE BLOOD FROM STONE. WE'VE ALREADY SQUEEZED MUCH BECAUSE IF YOU REMEMBER WHEN THE LAW ON A PPA WAS PASSED, RIGHT THERE THERE WAS A 30-CENTAVO REDUCTION. AND WHEN IN... SOMETIME IN MAY, MAY 2001 THERE WAS A REDUCTION, IN APRIL 2001 THERE WAS A PPA REDUCTION OF 20 CENTAVOS. AND THEN THIS MONTH BECAUSE OF THE CEASE AND DESIST ORDER THERE WAS A FURTHER REDUCTION. AND NEXT MONTH THERE WILL BE A FURTHER REDUCTION BECAUSE OF NAPOCOR's BRINGING DOWN ITS PPCA TO 40 CENTAVOS.

TODAY, OUR POWER RATES AS I SAID ARE NUMBER 2 IN COST TO JAPAN, WHICH MAKES US UNCOMPETITIVE THERE. BUT THE JULY BILLINGS WE WILL BE NUMBER 6 OVERTAKING SINGAPORE, HONG KONG, CAMBODIA AND BRUNEI. NUMBER 7 IS KOREA. SO MY NEXT GOAL IS TO OVERTAKE KOREA, WHICH IS REALLY CONSIDERED THE MOST COMPETITIVE, ATTRACTIVE COUNTRY FOR INVESTMENT IN ASIA TODAY, NEXT ONLY TO CHINA.

SO, LET'S ALL CONTINUE TO WORK WITH THAT. SO FROM HERE WE WILL BE SIGNING... I WILL BE WITNESSING THE SIGNING OF THE PROMULGATION OF THE INVESTMENT OF THE RULES AND REGULATION OF THE WHOLESALE ELECTRICITY SPOT MARKET WHICH IS NUMBER 4 OF OUR 10 POINTS. AFTER THIS, I WILL PRESIDE OVER A MEETING OF THE INDUSTRY PLAYERS. ACTUALLY, I ASKED VINCE, I WANT TO MEET THE INDUSTRY PLAYERS. WELL IT SO HAPPENED WE'RE SIGNING AN... YOU KNOW, WE'RE DOING A LAUNCHING TODAY. SO, IT'S OKAY, DO IT IN MALACA„ANG SO WE CAN HAVE THE MEETING. SO I ASKED THE MEDIA TO COVER MY REMARKS FIRST SO THAT THEY CAN HAVE THEIR STORY BEFORE THEIR DEADLINES ABOUT THE 10 POINTS. ITS OPTIONAL TO LOOK AT THE... TO TAKE, TO COVER THE CEREMONIAL LAUNCHING OF THE RULES. BUT THEN AFTER THAT OUR DISCUSSION ON HOW TO CARRY OUT THE 10 POINTS AT GROUND LEVEL IS ALREADY GOING TO BE WITHIN THE INDUSTRY ITSELF. AND WE WILL EXCUSE THE MEDIA.

SO, I THANK YOU VERY MUCH FOR BEING HERE. AND YES, LET'S TRY TO SQUEEZE BLOOD FROM STONE BECAUSE WITH GOD ALL THINGS ARE POSSIBLE.

THANK YOU.

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