Privatization of Transmission Corporation of NAPOCOR

Privatization of Transmission Corporation of NAPOCORIn Philippine context, privatization is apply to refer to the policy which everyows the goernment to disengage in activities which atomic number 18 non part of the g ein truthwherenments inherent function. This may be in legion(predicate) forms, such as the complete turnover of macrocosm corporations to the mysterious sphere and scraming gains to insular firms who has the necessary re authors to manage it, or the judicature would undecomposed turnover certain services to the sequestered ara but it would lifelessness be down the stairs slightly judicature regulatory procedures and incentives. This privatization al approximatelyly occurs inside the framework of frugal globalization. By economical globalization, it means that privatization is use as a measure to pursue the globalist restructuring of the state and to further develop the foodstuff access which mostly benefits the business elites of a state and of none, the trans subject argona corporations (TNCs) (UP and Stiftung 91-93).Privatization, a great with liberalization and deregulation, is excessively a part of neoliberal globalization which aims to progress to surplus products within the economy and in like manner huge capital for production. In the process, private welkin continues to have a big role over the public sector activities, make possible by direct channelize of ownership and management and by the elimination of the uprightnesss that promotes the public interest (deregulation), and by means of the reduction of bud beat up for the staple services, that in turn leads to the graver humiliation on the access on public services of the great deal. For example, in privatizing public utilities like the water and agency sector of the Philippines, many detrimental factors be experienced by the the great unwashed, particularly the government workers under the corporation because they were displaced as private compani es turned to date those sectors. The despic fittingest sector of society excessively was immensely affected since those private companies confabk to get lavishly profits which leads to actually high damages at the peoples expense (IBON xi-4).During the Marcos regime, a decree on humanity of government owned and controlled corporations (GOCCs) was made by dint of Presidential Decree (PD 2029) and subsequently on through with(predicate) PD 2030, a policy was made which promulgates privatization. By the clock time of Cory Aquinos regime, this decree was showtime apply through Presidential resolution 50 on the 9th of December in 1986 (TransCo).In 1990, Aquino overly subscribe 6957 or what we call as the Build-Operate-Transfer (BOT) legal philosophy which has let and approved the hinderance of the private sector in the financing, contracting, operation and also maintenance of alkali projects. But in 1993, when Ramos assumed the presidency, he signed RA 7718 amending the BOT law and further allowed the full involvement of private sector in crucial government development projects. through with(predicate) this act, various forms of privatization schemes have evolved (TransCo).Many reasons were presented by the government regarding the privatization of the GOCCs. To enumerate some, they said that through transferring these assets to the private sector, it would give birth a better efficiency in its operations. Furtherto a greater extent, it was also stated that the government undeniable to collect more than revenues for government spending to improve the economy, and this can solely be done with such move. Also stated as reasons by the government is that first, it would lead to increase in investments which ordain boost up the economy and bequeath also help to develop grocerys for capital coevalss. Through lessening the budget for public services in GOCCs, and selling those which atomic number 18 poorly performing and property-wastin g, the government judge to decrease our budget shortfall and also to re covering fire its expenditures ( sing).START OF NAPOCOR PRIVATIZATIONWhen the case great authority Corporation (NAPOCOR) was created in 1936, our government has principled it to generate and transmit sources of energy firearm letting the private sector to be in complaint of its distribution. But it 1980s, the government has started to piecemeal entrust the entire advocator sector to private companies. From motive Pres. Aquinos executive Order (EO) No. 215 issued in 1987, the office generation sector of NAPOCOR was started to be deregulated. By the force-out of build- cultivate-transfer scheme, EO No. 215 also gave route to private firms to ground and manage origin plants in the country. This situation was further streng and thened when Ramos took over the presidency. RA 7648, the agent Crisis Act of 1993 was passed and encouraged more private companies to equal in the role generation sector of NAPOCOR. Later in 1984, spread discover BOT law was also passed and had given Ramos to have emergency spots which allowed him to extend to contracts, most of which were impertinent corporations, regarding the construction, repair and new(prenominal) technical maintenance of NAPOCOR without the need to bear it through a public bidding (IBON 82-83).Due to the contracts of mostly 10 to 25 years made with the foreign companies, NAPOCOR was obliged to conciliate the power contracted to them whether they had actually produced or consumed power or not. This is what is referred to as the ram or pay provision.According to this provision, NAPOCOR needs to buy 75-80 percent of a firms power capacity even though it didnt really produced or consumed it. This in turn made NAPOCOR to pass the obligation to the local anaesthetic consumers even though they really hadnt consumed even a subaltern part of it, which is really a great burden since it takes about 60 percent of the total power available at the economy. Of course, this is clearly captivaten when power distributors such as Meralco get whole sale power from NAPOCOR and pay for it which is the Purchased Power monetary value Ad bonniement (PPCA) that corresponds it (IBON 83-84). forth from this Purchased Power Cost Adjustment or PPCA, NAPOCOR has also passed the Fuel Cost Adjustment (FCA) fees to the power distributors collectable to the need to do its obligation to tally enough fuel to the firms or power plants in which it had its long-term contract with, regardless of the fluctuations in the terms of oil or fuel in the global market or even in the domestic domain. These two represents of NAPOCOR and wholesale costumers further make up the Fuel and Purchased Power Costs Adjustments or FPCA (IBON 84-85).Furthermore, the contracts made by NAPOCOR to the independent power plants (IPPs) atomic number 18 in dollar order. This solely means that charges between the two entities are affected by the foreign e xchange place or peso-dollar rates to compensate the change in payout because of the continuing weakness of peso bills as against dollars.Due to the fact that these IPPs are owned by foreign companies, they are selling their power to NAPOCOR by almost $20 per megawatt time of day (mWh) higher than the power change to them by their own power generators. Of course, these really high rate would translate and reflect to the additional fees charged to the end-consumers of electrical energy through the purchased power adjustments (PPA) without their power to refuse against it even though in 2002, a review made by the government showed that most of these IPPs has both legal or financial issues and are disadvantageous for the government itself.During the Arroyo administration, this PPA was stillness not stopped in operations of NAPOCOR since it was a great source of income for the government, although we know that the local consumers are the ones who intensely aim from it and also of course not to jeopardize the privatization of NAPOCOR and to continue attracting foreign corporations to invest and participate in such measures of the government.Among some an early(a)(prenominal) trans study corporations (TNCs), NAPOCORs IPPs incorporate energy sectors giants such as Marubeni, Kawasaki, Mitsui, Chevron, and Enron (IBON 85).According to Meralco, PPA is just one cost adjustment mechanism that is passed on to the local consumers, since thither is also the CERA which is intended so that Meralco buy the farm be able to recuperate the changes in operating costs and repayment of pass debt mainly brought about by the changes in foreign exchange rates in which the contracts are bound.Due to this, Meralco claims that only little of the consumer charges go to them, since it originally goes to NAPOCOR as PPA and to the government as franchise tax. But, apparently it turns out that these talent be made up stories or complains since Meralco as a power distributor was al so allowed to have its own IPPs by virtue of occasion Pres. Aquinos EO 215. Meralco has indeed three IPPs which are among the countrys largest companies which supply almost half of its power requirements. This only means that Meralco, having its own IPPs actually earns a lot of money from the PPA. It has also made use of it to make a way out of the controversy arising from the fact that it has monopoly control over power distribution. By this, it was also able to control and manipulate the computations regarding the IPPs which are remarkably its sister companies. For example, basic Gas which is one of its IPPs and partly owned by Meralco itself, was used to make anomalous trans activitys in PPA since Meralco can actually protect and cover the supply cost from the said IPP even though in verity it doesnt even delivered one kilowatt of power to Meralco (IBON 86-89).Meanwhile, we can clearly see that the resolves of letting private corporations participate in the power industry is obdurate to the rationale fag its approval, which among others is to relieve the government from its burden on accompaniment the setting up of power generating plants (UP and Stiftung 115-116). Instead of it happening, the reverse had taken place. NAPOCOR has left over(p) in charge of paying the debt obligations of the IPPs assured by state guarantees which were made to further attract investors. Through those incentives, including long-term power contracts, IPPs were assured that they exiting have come back on investments whatever happens.Electric Power labor domesticate Act (EPIRA)Through the Electric Power Industry Reform Act or EPIRA which is RA 9136, payment for stranded costs of NAPOCOR or the costs due to stranded debts and contracts, were passed on to consumers as a cosmopolitan charge along with the cost of restructuring the power industry. This was implemented during the Arroyo administration when she state that the government moldiness not shoulder this expense but must be recuperated through a universal charge.To further clarify some oldly mentioned terms, stranded debts as part of the stranded cost is the obligations that pass on be left out by NAPOCOR once it is sold to private individuals, while the other one, the stranded contract cost is the difference from the price of electricity from the wholesale market to be set by EPIRA itself and the price from IPPs. Due to this very large cost of NAPOCORs obligations which are partly paying by the government through debt from foreign sources, very high priced bonds were sold by the government to finance its principal obligations mainly due to those long-term contracts. So it is obvious that it has only made the government and the people suffer from paying them instead of getting away from funding large list for power generators, while the private sector like the transnational corporations (TNCs) and other local elites were getting more and more income from it each year do it as its mil king cow. Also it is evident that PPA has only intensified the dependence of government to private sector to pay its foreign debts and its grave situation of national bankruptcy which clearly impacts detrimental effect to the poor Filipino citizens (IBON 89-91).Actually, in 2001, the Arroyo administration had pushed EPIRA to be approved for a great loan to be released, the $900 M ADB Power Sector Restructuring loan which was filed since 1998. IMF had also played a part on its approval, since it made it a condition for it to release a $300 M rehabilitation loan for the Philippines since 1999. By this, we could clearly see that the government had pushed it not to improve the condition of accessible power service to the people, but the adverse that favored the private companies and further strengthened their control over the power service.Transmission Corporation (TransCo)Along EPIRA in 2001, the substructure of a National Transmission Corporation (TransCo) in 2003 under NAPOCOR was a lso signed into law. In line with this, the Arroyo administration had also pushed for its privatization by the mandate of the similar aforementioned law. This TransCo as a GOCC is basically in charge of operating and managing the power contagious disease system of the country which go away get in touch power plants to the electric distribution utilities throughout the Philippines (TransCo). In simple terms, it leave alone be taking control over the transmission and sub-transmission functions, assets, as hygienic as the liabilities of NAPOCOR. TransCo, in taking over the sub-transmission assets ordain manage it until they are finally disposed into their proper distribution utilities which in turn will collar its planning and overall maintenance of those assets. But, as like NAPOCOR, through EPIRA, TransCo is mandated to be privatized through either an outright sale or a management concession contract lasting for about 25 years. The part of Energy (DOE) and the Department of Finance (DOF) were basically in charge in the planning and setting up its transfer to private companies (Cook and Mendoza, 9 68).As again an foreknowation of the government, from privatizing TransCo, it expects a high income which will be used to pay the NAPOCORs remaining debt that is extensively big which will in result lessen or decrease the governments public sector deficit. Aside from that expected revenue from its sale, the government also expects that when a techno orderedly advance and expert private concessionaire will take over the transmission line, it will result to more efficient and world class network. It says that due to the stultify energy crisis, people are hard to be tind with a sound and secured supply of electricity at low rates, so privatization of such sector will be a necessary response to it, while attracting more investments at the energy division (Perez).But, the government actually marginalizes the stake of local power sector by doing this. First, th ey can be exploited since through the privatization of TransCo, it will surely lead to a monopoly of the private business. Since in EPIRA, the cross-ownership of distribution, generation, and transmission under NAPOCOR is allowed, this only means that through the profit-seeking goal of the monopolies over those areas, power rates will still remain indefinable (TransCo).TransCos privatization clearly straightforward the government favoring TNCs as well as local elites like the Lopez classify of Companies in their reinforced power over the Philippines power sector. According to the death chair of PSALM or Public Sector Assets and Liabilities Management Edgardo del Fonso, it would seem not attractive to foreign investors if the assets of TransCo will not be franchised nationwide (PSALM).Actually, base on a primer released by IBON Foundation in 2003, in that location were already at least eight TNCs which had expressed their interest in the privatization of TransCo, not to mention that these TNCs are among the worlds largest. And some of those TNCs were already on hold of some local power industries operations. But due to certain limitations of our constitution, they were only allowed to operate up to 40 percent of the power sector, but then again PSALM had admitted that later on, it is possible that there would be some restructuring to be done to allow greater share of private sector on power service. This only means that possibilities are open on the total foreign control of our local power sector at the expense of the national interest and welfare.As of now, this transmission system under NAPOCOR known as the crown jewel of the governments power privatization program is already at the hands of the private sector. On the 12th of December in 2007, PSALM has conducted a successful bidding for TransCos 25-years concession contract to be able to maintain its functions on transmission. On the year 2008, it finally announce that TransCos transmission function wi ll be transferred under the management of the National Grid Corporation of the Philippines (NGCP), the successful bidder who offered a US $3.950B for the said concession after(prenominal) the three failed attempts in the front years (PSALM).This was scorn the opposite of various consumer and militant groups like the People Opposed to Warrantless Electricity range (Power) and the Bagong Alyansang Makabayan (Bayan) because for them it was a crucial step for the government to take since the burden presently will heavily fall at the local consumers when the winning bidder will make a way to recover its loss and investments at the earliest time possible. As Legazpi cited in her article, according to Tapang, a convener of Power, (Transcos) infrastructure provides a highway for electricity and other uses. Whoever controls it can impose a doorbell fee on users of this highway. In the hands of private interests, there is ever so the potential for abuse in the name of greater profits . Bayan has also released their avowal through their secretary general in the person of Reynato Reyes, adding that TransCo is of strategic immenseness to our economy and so it must remain as state-owned and it is basically a prejudice on the part of the government to continue to such action due to the fact that this will lead to a great adulterate to be carried on by ordinary consumers (Legazpi).Amidst those oppositions, unfortunately on that same year also, the congress had approved a bicameral resolution which will grant franchise of TransCo to NGCP, legitimizing it as a private unit to broaden a public service. By December of that year, former Pres. Arroyo signed the law which will officially grant franchise to NGCP, RA 9511. Following that year, in 2009, TransCo was formally turned over to PSALM in a observation held at PSALMs office in Makati on January 14, 2009. The event importantly indicated the NGCPs authority to start TransCos operation under its new management with At ty. Moslemen T. Macarambon as its first new president. Currently, it is headed by Rolando T. Bacani, president and CEO (TransCo).After the sale transaction of TransCo, NGCP has paid almost US $1B to PSALM as provisioned by the contract as its straight payment for its operation. PSALM is also positive that after TransCos privatization and turning over of NGCP on its operation will last result to an efficient operation and effective maintenance of our transmission network, while counting on the successful record and wide experience of the pool and its foreign partners (PSALM).After TransCos successful bidding and private transfer of ownership, PSALM is still opening its invitation for bidding of other power plants such as those at Naga, Cebu, the Naga Power Plant Complex, in Tongonan, Leyte, the Unified Leyte Geothermal Power Plants, and in Pililia, Rizal, the Malaya Therman Power Plants (PSALM).In 2010, many assets under power generation have been sold as well as its contracted ca pacities. In spite all of those, the PSALM and the government still pushes for further privatization of the power sector.EFFECTS OF PRIVATIZATIONWhen the government resort to privatizing state owned corporations especially those involve in economic services, this basically turn to an impact which is as negative as the liberalization of trade and investment. As a Third dry land country, taking this crucial step marginalizes the interest and welfare of the people and other economic development programs and projects for the country. The people are more vulnerable and are easily affected by the impact of having no transmission lines and the inaccessibility of basic social services. After some years of the promise of amend posture and efficiency of these privatized sectors by the government to the people as the reason behind the privatization of such basic public services, the supposedly good results are unless unseen but on the contrary, public menaces and difficulties are experi enced of the people on that particular service (IBON 131-134).First of all, the government did not had a financial relief on privatizing public services, since like in NAPOCOR and other corporations, the government becomes more bankrupt and indebted to private or foreign investors since privatizing assets only provide short-term or one-time big-time revenue, but in the long run, results to a great dependence on private sector due to the debts incurred after privatization. it has also resulted to a lesser allocation of budget for other social services due to the automatic appropriation of budget to debt religious service mandated by the law. Some privatized assets by the government were also not as considerable since sometimes they are key economic players in the countrys economic growth. Moreover, in the case of privatization of NAPOCOR, the government had shouldered the huge liabilities left when it was privatized, or some parts of it. This results to a huge public funds be used to pay for its interests and amortization. Through state guarantees, the government bore the obligations of the IPPs, which through long-term contracts are assured by the government to have return on its investments no matter what. In short, the government is no more than losing in this kind of program and gradually is put into a arduous bankruptcy. This is one of the main reasons behind the fiscal crisis experienced by national government in 2004 and still contributes to the worsening condition of the economy.On improved efficiencyOne point that is to be remembered regarding privatization is that having the private sector does not necessarily mean that the previously owned and controlled corporation of the government would yield better efficiency. In the first place, they were not created to be profit-oriented but to provide accessible support and basic service to the people. This is critical to the consumers situation, since if the market fails, there should the government to sec ure them against it and continue to provide them its responsibility. Supposedly, our government expect that when private corporations took control over it, they will invest in its improvement, but just like the MWSS privatization, this is not what is actually happening but they use their revenues to lose ones temper their properties around the globe, in short they are not concerned of cleverness of operation of the corporation, but more concerned on how to gain more profits.Peoples access to basic servicesWhen GOCCs are privatized, people can expect spikes in their rates and inaccessibility and unaffordability of the basic service that were previously provided to them by the government in low and accessible prices. Of course this is only logical since private corporations main objective is no other than to get more profit. We can expect this effect to be mostly aggravating to the poor and marginalized Filipino citizens who also try their best to survive with their very small incom e that doesnt increase in real terms and growing projectlessness throughout the country. In fact, almost 20 percent of an average household income is spent to pay their electricity bills alone. Because of this, some of the poor Filipino families had chosen to cut their electricity connection to lessen daily budget costs, or even on some families their supply was cut due to being not able to pay for their high electric bill.Up to now, many the typical Filipino consumers are not able to get basic services at lower or reasonable rates since as like the government said, those privatized institutions should have been more efficient due to improved infrastructure implemented by private firms. But, it just bloated up their rates that the people could precisely pay for it, just like in the power service of NAPOCOR, cost recovery mechanisms were passed to the peoples responsibility. So through that, we can already conclude that when market forces rule without any regulation from the govern ment promoting public welfare, the consumers situation is by and large at stake and worsened.Because of this we can clearly say that where is the choice of power and power choice that the government said and promised to its consumers if the power industry and its functions will be privatized? Clearly, it shows that it was merely a false and deceiving statement.Workers situationsAside from these detrimental impacts, privatization also increases level of unemployment especially in underdeveloped nations like the Philippines. This is due to the fault of workers from the previous state-owned corporations or in other way, through contractualization of those somehow gilt workers left at the privatized corporation. In this way, workers are put in an knowing situation while the private corporation continues to gaining more profits and strip production costs. They are also aggrieved through cutting their wages without their power to stop those private firms.In the restructuring and priva tization of NAPOCOR, more than 2,000 of its employees had already lost their job and currently, as threats of further privatization of electric cooperatives are on the way, this number will possibly increase. Aside from the employees of NAPOCOR who lost their jobs, there are also many workers from industrial and commercial sectors who lost their jobs due to closure of their companies which one of the factors which caused it is the very high electricity rates that they have lesser production that cannot postulate with other industries either around the country or outside. Factory workers also dont get wage hike since their employers insist that they are spending more and more on operation and maintenance costs as industrial electricity rates also sores up.Actually last July 2009, more than 1,000 former workers of TransCo were not accepted by NGCP to continue their work on it after 5 months of transition period, despite having EPIRA assurances that were not that effective afterwwards . This was due to the high NGCP standards in accepting new employees according to the Mindanao Transco Employees Union or Mintrea. in advance TransCo was privatized, the consortium of the private companies to take over it said that they will not let those more than 5,000 employees of TransCo to lose their jobs instead they will again claim them even privatization is already done. But according to Walder Revellar, North Luzon chapter president of Mintrea, most of the TransCo employees suffered retrenchment even before when NAPOCOR was started to be privatized when reorganization within the sector began. Most of them were of old age but has not reached the age of hideaway on the new private administration of TransCo due to forced leave since according to them, they dont have the full capacity to absorb all of the previous workers of TransCo. Being too old to be rehired, workers like them as a result had difficulties in finding new jobs because of their age constraint. Some of the pr evious employees also are at young age, which are said to be too young to be retired, that could have done great job on TransCo if they were not removed from their jobs as Revellar stressed out also. Unfortunately, despite the workers complains they couldnt anything about that concern because it has been transferred already to the private sector (Inquirer).After of all the results of TransCo privatization, it only appears to us that the government is just making a way to decline its social responsibility to the state and most especially to the people in providing the basic services that it must provide in the first place. Public utilities and services play an important role in defend the poor and marginalized sector of society so letting the free-market and the market forces operate on its own on those assets would defy the public assets original feeling like the power sector in generating efficient and affordable electricity throughout the country. It had also meant a lesser gove rnment intervention to the economic and social activities of the state, and so it results to peoples situation becoming worse over time as private sector continues to exploit our resources and earn super-profits. This should not be tolerated since first and foremost, these are all done at the peoples expense.