And that’s the key. Every marketing person now wants to sell you an experience. Even the buying experience is supposed to be packaged as something pleasant and fulfilling. In fact, that’s what they call it, whether transacting online or in person: “order fulfillment” or “service fulfillment.” Basically, they promise to give you a pleasant, fulfilling experience as they get your money. Unless, of course, it’s a scam and the experience is far from pleasant in addition to possibly losing your money.

Essentially, the deciding factor is the intersection between a product or service and a person’s interests. The marketing people seem to know it even before you do because whenever you search or browse something on the internet you are soon bombarded with ads, posts and articles related to what you clicked on.

One of my interests is construction and repair or do-it-yourself stuff. I think I got it from my father, who was an aircraft electrical technician and also liked carpentry and plumbing. (He was among the early postwar technical personnel sent by the Philippine government to train with the US Air Force, and among his feats was that he topped his tests, besting even a hotshot American classmate from the US Strategic Air Command.) He had a large workshop with electrical, carpentry and plumbing tools, and a large work table made of heavy hardwood in our old family home.   

Thus, my interest, but not necessarily the skill, as I am not particularly good with my hands, but I definitely like tools and what I can do with them. I think I have an addiction to tools. I can spend much time browsing the aisles of home improvement stores, looking at all sorts of power tools and implements and checking out what they are for. It is all I can do to keep myself from buying another hammer or another set of screwdrivers or another set of wrenches and drill bits. I now have innumerable tool boxes to store them in and often forget what I bought.

I am now into my fifth electric drill, third angle grinder, third welding machine, second auto-darkening welding mask, fourth power washer, second power saw, second riveter, second electricity multimeter, third wire stripper-crimper, second grasscutter, third air blower, second soldering iron, first socket fusion tool kit, first demolition hammer, first electric planer, first chainsaw…

I prefer just having one handyman to do all the home maintenance and grounds and garden work, and so I try to keep the person’s job easier by getting him all the tools and accessories he needs. Thing is, I usually prefer for him to have his own set of tools apart from mine. Thus the “need” for multiple sets and the multiplication of tools.

Plus, the infinite variety of home maintenance and improvement tasks feeds my tool fancy. Browsing the stores, catalogues and online shopping, you’d think there’s a tool for every job. For example, why is there an endless variety of screw heads and sizes for which you also need an endless variety of screwdrivers?

Anyway, come to think of it, why should I remain a consumer? I should also be a seller! I do have a lot of long unused photography equipment: camera bodies, lenses, flash heads, drones, filters, tripods, chargers, batteries, darkroom equipment, bags and carrying cases, and all sorts of accessories. I even have a medium format film camera that I bought from Vic Valenciano (the father of Gary Valenciano), who was a noted photographer in his day. I should take them out of the dry cabinets and sell them. 

Yes, that’s it! It’s time for me to go full circle and give somebody else a pleasant and fulfilling buying experience.

Read more: Over a hot stove: ‘Ube halaya’ and love’s labors

The post To buy or not to buy appeared first on CoverStory.

In its preliminary review, the Energy Regulatory Commission (ERC) disallowed the expenses of National Grid Corporation of the Philippines (NGCP) amounting to P3.7 billion, which it said were “improperly documented or not recoverable for customers.”

The biggest items disallowed were for public relations, corporate social responsibility (CSR), and advertising expenses. 

NGCP’s advertising expenses, for example, reached P130 billion from 2016 to 2020. It argued that these expenses were “not for marketing purposes” but for “information dissemination.” 

The ERC, however, demanded proof of the need to spend such an amount on ads. 

“There is a test of reasonableness [in assessing these expense items]. If these were spent on full-page ads saying ‘Bawal humawak ng livewire,’ [we must ask]: reasonable ba ‘yung full-page ad saying that?” ERC Chair Monalisa Dimalanta said in a news conference last November, in which she announced the results of the commission’s preliminary review. 

In a news conference held right after the ERC’s own, NGCP Assistant Vice President Cynthia Alabanza said it was “unfair” for the regulator to “retroactively” apply new rules.

“Before you join a game, you need to know the rules. And to retroactively apply rules while you’re in a game, that’s unfair,” Alabanza said in Filipino. “I’m wondering why they released [the result] when it is still raw. It’s like if we had 100 steps to take to the finish line, we’re still in step two.” 

To let the public know

Dimalanta said in the ERC news conference that it was necessary to release the initial findings. “I think we owe it to the public to let them know what is happening [in the review] and to provide guidance on what is allowed and disallowed [in the expenses of NGCP].” 

Alfredo Non, who served as ERC commissioner from 2012 to 2018, said there should have been “clearer guidelines” on what spending items were “acceptable.” 

“As far as I am concerned, the ERC has not released guidelines on how regulated entities may spend on CSR, or salaries,” he said. 

But Non acknowledged that during his time, the ERC disallowed salary increases for a government-controlled corporation. 

“When the Philippine Electricity Market Corp. asked [earlier] for higher market fees, because that’s how they cover their budget for salary increases, we disallowed it. Because they refused to show documents of their payroll,” he said, adding: 

“So if NGCP shows documents, then they should be allowed.” 

NGCP’s reply to the ERC findings is expected to have addressed these issues.

According to the ERC, the disallowances were intended to protect consumers.

“It’s not that the commission is prohibiting [regulated entities], for example, from increasing the salaries of their employees, or giving donations, or engaging in CSR [activities],” Dimalanta said in the ERC’s November news conference. 

“What we’re saying is, you can’t recover that from the rates [you impose on consumers]. You recover that from your profits,” she said. 

The ERC had previously ruled, in cases involving power distribution utilities, that CSR expenses should not be charged to consumers.

In its 78-page order, it also highlighted that the NGCP, as a public utility, is mandated to incur only “necessary and efficient costs,” with expenses kept “at a minimum.”

To send a clear message

Adoracion Navarro, senior research fellow at the state think-tank Philippine Institute for Development Studies (PIDS) said the ERC’s moves are intended to send a clear message to NGCP and other regulated entities to practice discipline.

“If before, [the NGCP] got away with [disallowed expenses], then the regulator is now setting more discipline,” Navarro, a former deputy director general at the National Economic and Development Authority, told the PCIJ.

“The regulator is now just enforcing that we have to stick with the principles or the rules,” she said. 

A former energy official who asked not to be named said the ERC is making sure that NGCP is “not shortchanging the industry and the Filipino people.” 

The official said that the entire rate-setting process is supposed to determine which expenses are considered prudent, and that it’s up to NGCP to justify its revenue requirements.

The ERC is “wary,” the official said. “It just wants to make sure that NGCP is functioning at its optimum efficiency, and that it is not shortchanging the industry and the Filipino people.” 

“The concession agreement is a privilege, and that comes with attendant responsibilities,” the official added. 

Will there be refunds?

The ERC is expected to release its final determination of the rates in the first quarter of 2024.

Will there be cash refunds? According to the ERC, refunds are possible but not guaranteed.

“What we’re seeing are just telltale signs. Because they are claiming this much, and we are deciding that they can only recover this much, then there could be a downward adjustment [on their allowable revenue], or a refund,” Dimalanta said in November.

Instead of cash refunds, the ERC is inclined to implement a “reduction of transmission rates,” Sen. Sherwin Gatchalian said at a Senate hearing held on Nov. 13, 2023, to discuss the commission’s budget. He defended the ERC budget during last year’s budget deliberations. 

“In terms of modality, it’s easier to reduce the rates, and easier for the regulator to monitor and apply, and to supervise [that kind of] implementation,” Gatchalian said during the hearing. 

How much that reduction would be reflected in consumers’ electricity bills has yet to be determined, he said, but added that it would be “significant.” 

Non said it was the release of the partial results that “created a wrong impression that there would be refunds.”

The release of ERC’s final review of NGCP’s fourth regulatory period was initially expected as early as August 2023. Instead, a preliminary review was released three months later, in November, around the time that Congress was deliberating on the national budget. 

“It’s budget season. [The ERC] had to show to Congress that they were doing their jobs,” said the former energy official who spoke with the PCIJ. 

The Senate approved an P888-million budget for the ERC, higher than the P611 million originally proposed by the Department of Budget and Management.

Under scrutiny and criticism

NGCP faced scrutiny amid heavy criticism of its performance as the country’s grid operator.

Its NGCP officials have been called to many hearings held at the House of Representatives and the Senate since parts of Luzon were subject to rotational power outages in the summer of 2021. It does not help that the Luzon grid also suffers from yellow and red alerts every year once the hot season sets in.  

NGCP is responsible for building more transmission lines, but many of its projects are delayed. Power producers have previously lamented delays in their connections to the grid. 

President Ferdinand Marcos Jr. himself reprimanded NGCP during his second State of the Nation Address in July 2023 over these delays.

“We are conducting a performance review of our private concessionaire, NGCP. We look to NGCP to complete all of its deliverables, starting with the vital Mindanao-Visayas and the Cebu-Negros-Panay interconnections,” Marcos said in his speech.

Last month, Marcos again took a swipe at NGCP for failing to prevent a total power blackout on Panay Island that lasted three days.

“This incident emphasized the vital role of these interconnection projects. We cannot afford to have another round of this costly interruption, not only in Panay Island but anywhere in the country,” he said in an NGCP event announcing the completion of the Mindanao-Visayas interconnection.

Marcos pushed for the completion of remaining critical interconnection lines, including the Cebu-Negros-Panay backbone project during the event.

“We look forward to your assurances in the promised completion of the 230 kV Cebu-Negros-Panay backbone project by March of this year,” he said. 

The ownership structure of NGCP has also been a subject of security concern because it is 40% owned by China’s State Grid Corporation. Lawmakers have expressed fears that Beijing could use NGCP for sabotage in case of heightened conflict over the West Philippine Sea.

NGCP said this is not a concern because “only Filipinos are manning [NGCP] substations.” The remaining 60% stake is split between businessmen Henry Sy Jr. and Robert Coyiuto Jr.

Financial muscle

On the other hand, there are concerns that cutting NGCP’s profits could affect its ability to expand transmission lines. 

NGCP needs the financial muscle to develop the country’s transmission grid and prevent massive blackouts. It also needs to modernize the grid to support renewable energy suppliers, according to experts.

In a 2023 report, the think tank Climate Analytics estimated that the Philippines would need transmission lines to accommodate 163 gigawatts (GW) of energy, taking into account the variable nature of proposed and committed renewable energy projects.

NGCP’s Alabanza also said as much. She said transmission planning would be critical to the green energy push.

“So if [the ERC] limits our ability to recover our bonafide expenses, then it would have an impact,” she said.

Non warned of consequences if the ERC’s preliminary review is upheld. He said NGCP’s investors could be “forced to pull out” if the effects of the review put a dent in the company’s financial ability to operate. 

“If I were NGCP, I would fight it out [in court], because the basis for you to continue is a going concern. And if the effect of the review is too significant, then I may pull out [of the concession agreement,” he said.

Whatever the outcome, the ERC’s final review of NGCP’s rates will inevitably have consequences on the energy industry. It will also translate to real costs that Filipino consumers will bear.

The post NGCP told to ‘practice discipline’ to protect consumers appeared first on CoverStory.

The Supreme Court petition filed by National Grid Corp. of the Philippines (NGCP) to halt a long-delayed review of its rates could keep power costs high and delay potential refunds to consumers.

NGCP is a private monopoly that operates the country’s power transmission lines, or the grid linking power generators to distribution utilities such as Meralco and electric cooperatives nationwide. Costs incurred by NGCP are passed on to consumers as part of their electric bills, accounting for about 10% of the total bill based on estimates.

NGCP suffered a setback last November when the Energy Regulatory Commission (ERC), in a preliminary review of its rates from 2016 to 2022—the fourth regulatory period (RP)—cut its allowable expenditures by half. 

The amount included disallowances worth P3.7 billion, which were spent for public relations and advertising costs, among others, that the ERC said should not be charged to consumers.

Senators have been among the most vocal in calling for the ERC to order refunds to consumers.

But NGCP took the case to the Supreme Court, questioning the new rules adopted by the ERC when it reviewed the rates of the transmission operator. It sought a temporary restraining order (TRO) on the ERC proceedings. 

NGCP lawyer Jerome Versoza announced this move in December 2023, as the ERC began proceedings for the fifth RP covering the years 2023 to 2027. 

If granted, a TRO would restrain “the honorable commission from continuing further proceedings with concern to the fourth RP application and the fifth RP application,” the Versoza said.

The fourth RP (2016 to 2022) is the subject of the November preliminary review, whose final determination is expected in the first quarter of 2024. The fifth RP covers the current period from 2023 to 2027. 

‘Regulatory failure’

Pete Ilagan, a consumer affairs advocate and former energy official, warned that a Supreme Court intervention would “delay the reset process, definitely.”

“But the bigger issue is the application for the fourth regulatory process is still pending, and it’s already past the period,” Ilagan said. “[It is] a clear case of regulatory failure.” 

During the December 2023 hearing, ERC presiding officer Maria Corazon Gines took note of Versoza’s manifestation, but proceeded with the pre-trial for the fifth review as the Supreme Court had yet to act on NGCP’s plea. 

“As there is still no TRO or preliminary injunction, then we will continue with the proceedings,” Gines said.

NGCP’s counsels stayed in the room but did not comment during the two-hour proceedings.

The details of NGCP’s petition remain under wraps. News organizations including the Philippine Center for Investigative Journalism (PCIJ) have repeatedly sought a copy from NGCP, but were denied. 

The PCIJ has also requested a copy from the ERC, but was refused. The regulator argued that the PCIJ was “not a party to the said case.” 

“The ERC is enjoined to observe the sub judice rule (which restricts comments and disclosures pertaining to judicial proceedings), consequently, [we are] constrained to deny your FOI (freedom of information) request,” it wrote in a letter to the PCIJ. 

NGCP has publicly questioned the ERC’s preliminary review of its rates because the commission—hobbled by internal issues and, later, the Covid-19 pandemic—changed the rules governing the review process. 

The ERC review, called the “rate reset,” is normally forward-looking and akin to a budget process. The ERC approves NGCP’s annual revenue requirement from which it can charge its expenditures.

The original timeframe of the fourth regulatory period covered five years—from 2016 to 2020. The rate reset should have been done in 2015. But a series of leadership changes in the ERC delayed the process.

The ERC only started the review process only in December 2022. It decided to look at NGCP’s actual expenses and added two more years to the fourth review period—2016-2022 from the original 2016-2020—to clear the backlog in time for the fifth review covering 2023 to 2027.

Excessive rates

Critics have found NGCP’s transmission rates, set in 2009, “excessive.”

The ERC’s preliminary review of NGCP’s rates from 2016 to 2022 cut NGCP’s revenue requirement—essentially, the transmission operator’s allowable expenses—to more than half. 

In its application, NGCP sought a revenue requirement worth P387.80 billion for 2016 to 2020, which meant an annual average of P129 billion. But the ERC, based on its initial review, found that allowable revenue should only be at P183 billion for the period, or about P36.67 billion a year.

From 2016 to 2020, NGCP operated on an interim maximum annual revenue (iMAR), approved by the ERC under a different leadership. 

This iMAR, said NGCP assistant vice president Cynthia Alabanza, was only an estimate but was approved by the ERC as there was no regulatory review at that time. 

“Just like when Congress hasn’t approved a government budget, the government would spend based on what was previously allowed. So that’s what we were doing… we were spending based on what was allowed [in the third regulatory period],” Alabanza said in Filipino in a news conference in November 2023. 

But the iMAR could be subject to review and may be revised, based on the ERC’s rules. 

3 major items

The majority of the ERC’s cuts in the preliminary review came from three major items: net efficiency adjustment, revenue under-recoveries, and net performance incentive

These three items were worth P104 billion during the five-year review period. 

The net efficiency adjustment is the incentive given to NGCP for achieving “cost reductions in controllable costs,” while revenue under-recoveries are expense items not recovered during the previous regulatory period. 

The ERC said a decision on both items would be made in the final determination of the review due this quarter. But it is not keen on granting a net performance incentive to the transmission operator. 

This incentive is based on a performance incentive scheme (PIS), a set of service and operational performance criteria, which is supposedly set before the beginning of every regulatory period. 

If NGCP meets these criteria, it is rewarded with an incentive. Otherwise, penalties may be imposed. 

In its application for the fourth rate reset, NGCP adopted the PIS set during the third regulatory period. But the ERC said it was “constrained from upholding this position.” 

“Considering that the PIS and its factors have not been established prior to the commencement of the fourth regulatory period, it follows that NGCP does not have the basis to enforce the incentives. Conversely, there appears to be no grounds for the imposition of penalties,” the November ERC order read. 

Alfredo Non, who was ERC commissioner from 2012 to 2018, said its position was debatable because NGCP should be recognized for meeting the criteria for incentives in the previous regulatory period.

“It is not NGCP’s fault that ERC failed to provide parameters for the fourth regulatory period,” Non said. 
The ERC said the disallowances were intended to protect consumers. See sidebar on rate reset.

Read more: Smoke, mirrors, wood pellets: Vietnam clears native forest to supply ‘clean’ energy to Asia

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