Transcript of the interview with Sen. Miriam Defensor Santiago after the Joint Congressional Power Commission hearing

On the JCPC’s position on the Steam Sales Agreement between PSALM/NPC and PNOC-EDC

The Joint Congressional Power Commission will pass a resolution requesting the Secretary of Finance who sits as chair of the Privatization Council to come to the Powercom perhaps next week to the Senate and explain why did that council approve the sale of PNOC-EDC considering that this commission has already indicated for the record for the presence of the heads of the power sector that we do not want PNOC-EDC to be sold. Number one, under the EPIRA law, it is the only entity in the government mandated to explore and develop indigenous sources of energy. So in our view, the sale, if it proceeds, will be a violation of EPIRA. It would therefore be illegal, and it that sense, might be a ground for action before our courts.

Number two, we oppose the sale because, as we’ve already said in 2005 in a resolution passed by the commission, there is no objection to the statement or the finding that PNOC-EDC is number one in the world in terms of steam technology and number two in the world in terms of geothermal capacity. It is earning at least P600 million annually, and this income will tend to rise because under a law the price of gas is indexed to the price of oil. The price of oil has risen from $35 per barrel to nearly $100 per barrel. And under Philippine law, if the price of oil rises, the price of gas correspondingly rises as well. Under that law, it is predictable that the P600 million annual income of PNOC-EDC will correspondingly rise.

Lastly, it is said that it is the most profitable venture of government. The argument that we should sell when it is profitable might be relevant in a business environment but we are talking of a policy environment. What is the national policy? Geothermal energy as an alternative source of energy should be sustainable in our country. If we sell this to the private sector, it is the private sector that will make money, not our government. Also it is said that since the privatization council already has approved the sale, we might lose credibility to our foreign investors. But yet, there is a countervailing opinion in the international business community that our economy will prove not as strong as we claim if we depend in a one-off sale to cover the budget deficit which should be logically covered by increased revenues from the Bureau of Internal Revenue and the Bureau of Customs. For all of these reasons, we are giving the Secretary of Finance an opportunity to air his side before the Powercom decides on more coercive measures to insist that PNOC-EDC should stay within government ownership and control.

There was a spirited defense on the sale by the President of PNOC-EDC, Mr. Paul Aquino, and we fully appreciate his arguments. However, it was the unanimous consensus of the commission of all 14 members that his arguments are invalid arguments. They are effective for a business organization, but not for the running of government. We do not want to take drastic measures at this point against those responsible, but our feeling is there has been no proper courtesy extended to the Powercom.

The JCPC is no ordinary committee; it is a commission. In effect, under the EPIRA law which created it, this commission is independent of its own chambers, whether the Senate or the House of Representatives. So it is an extremely powerful commission. When the commission expresses an opinion, and in fact passes a resolution, it is highly impudent of the executive branch—I am not talking of the President—to take action contrary to a resolution of such an elevated legislative group as the Commission. Since they already knew that we were already convinced that there should be no sale, why did they not even bother to formally inform us that they were considering this very same sale in the Privatization Council; we have to learn about it during the recent budget hearing.

The resolution will state that we view it as an illegality, although we will try and work out the proper language so it will not come across as too harsh or threatening because all three branches should always work in harmony since that is the best way to advance the cause of government. But there is no denying that the Powercom is extremely upset about this news particularly since the highest bid was approved yesterday. However, today is the deadline for the issuance of the notice of award and November 30 is the closing date when the winning bidder is required to make a full payment of its bid. So we still have time. We, in our resolution, imply that there is a need to suspend the proceeding of the privatization process, and in effect to give the Powercom at least notice to consider any step as drastic as selling off what has already been described as the crown jewel of our economy.

We considered all arguments. As chairperson of the commission, I already read out my own summary of all arguments in favor of and against privatization. We were hoping that that they would show that government earnings would increase with the sale, but it won’t. There is no certainty; all prices are increasing. Therefore, gas prices will increase as well. so why are we selling an asset in the process of making even more money than it has in the past, and its income-generating abilities have never been in question? Why are we selling it? And who will promote and develop indigenous sources of energy? The Department of Energy testified that it does not have funds for that function since the mandate was very clearly given to the PNOC-EDC by EPIRA law. That will create a vacuum in our energy plans for the future. That would be highly irresponsible. It is not the mandate of the DOF to raise revenues through privatization. What would the international investment community think of a government that seeks to balance off its budget by selling off its assets? [By doing so] Our government will lose even more credibility than the loss of credibility that might occur if there is investor backlash owing to the suspension or withdrawal of the private sale.

I believe that this problem was caused by the confusion in the minds of the officials of PNO-EDC, the DOF and the Privatization Council. They were confused between making identification between raising money and the promotion of indigenous sources of energy. They just wanted to make money as quickly as possible. But our assumption here in Powercom is to think of the future, not only of the short range, intermediate, also of the long term consequences of the loss of PNOC-EDC. That is what really bothers us. I don’t think that the Powercom will allow that to happen.

What may be the punishment for officials if they are found violating laws with the sale of PNOC-EDC?

We can hold the Secretary of Finance in contempt and punish him. Number two, is we can file a case in the Supreme Court and ask for a TRO on the ground that the sale is a violation of law. Three, we can appeal to the President to withdraw the approval. But we don’t want to go into those things yet. In the spirit of interdepartmental courtesy and avoid conflict between two branches of government, it would be best if they just defer to the decision of the Powercom. And then we’ll take it up from there after the next hearing.

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