Impossible demands
We will let on government planners on a private sector secret which actually has long been known to practically all corporate planners. For almost 20 years now, many companies routinely input the high likelihood of a drought every five years and adjusted their corporate plans accordingly.This nugget of defensive strategy we learned from the corporate planner of one of the biggest conglomerates in its time, which was severely weakened by the money market collapse in 1980-1981 and finally buried when its principal flew the coop after the ouster of Ferdinand Marcos. The planner learned to take the vagaries of the weather seriously when he started as an analyst of the US agriculture department, working out from a desk at the US Embassy. For all we know, he is still using the same, if improved, forecasting model at a commercial bank where he is now serving as executive vice president.
His point was that invoking force majeure was rather silly because information about the cyclical El Niño phenomenon was readily available (global warming was not yet a familiar term in those days). And invoking force majeure won’t cut ice with the board of directors which he was reporting to. So his group’s investment, trading and lending programs were designed to minimize exposure on industries dependent on good weather, meaning, principally agricultural-related companies, whenever he saw signs of a coming dry spell.
How good is the planner? Well, let’s just say he is treated as a star every time the Philippine Economic Society holds its annual meeting.
So why doesn’t the government do the same, pro-actively addressing the threat of a long dry spell like what the country is experiencing now?
Wrong question. Most agencies, especially government-owned corporations and financial institutions, do plan ahead. It’s just that politicians tapped to head the corporations and to sit on the boards have priorities set by their masters.
Let’s take the National Power Corp., the current whipping boy for the rising power rates due to a) idled hydroelectric plants and b) more expensive fuel. It is not publicly known that Napocor is a subscriber to a very expensive weather forecasting service that is acknowledged as being better than the official weather bureau. The Napocor should have known the hydros were about to run out of water. It should have been prepared to harness its other plants, mostly thermal.
The reality is that the Napocor has not stocked up on coal, for example, in anticipation of greater reliance on thermal plants. The reason is simple. The pressure is on Napocor to raise its profits while ensuring stable rates. Remember the to-do about the alleged price-fixing in the wholesale market? The Napocor told the trading groups at the wholesale market that they should not sell output at giveaway rates. For its trouble, Napocor was cited by the Energy Regulatory Commission for price-fixing.
This week, wholesale spot prices peaked at over P52 per kilowatt-hour, more than 10 times the recent average. We expect to see stepped up calls for heads to roll at the Napocor. As if cutting off heads will lead to an additional megawatt of power to the grid.
And so the finger-pointing goes on, with every expendable executive adjudged guilty to absolve the pols who demand adequate power supply at a cheap price on rising production cost.
They might as well demand the squaring of the circle. But that’s politicians for you.
