A just-concluded House hearing on the financial viability of state-owned Power Sector Assets and Liabilities Corporation (PSALM) may have uncovered conflicts of interest between certain congressmen charged with oversight over the energy industry, and powerful interests within that industry.
The inquiry was conducted by the Good Government Committee headed by Bulacan Rep. Jose Antonio Sy-Alvarado, jointly with the Committee on Public Accounts headed by the redoubtable Rep. Michael T. Defensor of the Anakalusugan party-list. The two committees wanted to determine if PSALM could remain viable given the huge amount of foreign loans it needs to secure yearly just to pay the interest on its loans, even as it continues to carry almost P100 billion of receivables from certain power companies, tantamount to 25 percent of its total foreign obligations.
It may be recalled that PSALM took over all the assets and debts of the National Power Corporation (Napocor) when Congress passed the Electric Power Industry Reform Act (EPIRA) or Republic Act No. 9136. As of last year, PSALM had succeeded in bringing down to P424.8 billion its financial obligations from a peak of P1.2 trillion in 2003. But a price had to be paid for this: Last year alone the GOCC had to borrow $1.1 billion from foreign lenders so it could service its dollar and yen-denominated loans.
Finance Secretary Sonny Dominguez has already complained that the money spent by PSALM annually for interest payments—P2.6 billion as of 2019—is money wasted that could have been spent on other important projects, like more school rooms for the country’s growing population of primary education students. In light of our high school students’ recent dismal performance in international tests of reading, math and science comprehension, you certainly can’t argue with that.
So Dominguez, in his capacity as chair of PSALM’s board of directors has instructed the company to make sure it collects the P100 billion that private power generation companies and electric cooperatives owe the company—never mind the possible fallout from powerful supporters of the Duterte administration.
* * *
San Miguel’s South Premiere Power Corporation (SPPC) is one of those powerful companies with outstanding payables to PSALM.
In fairness, the company disputes PSALM’s claim that it owes the government an unpaid obligation of P23.94 billion. This dispute arose even before Duterte became President, when the company’s contract to manage the IPP-built Ilijan Power Plant in Batangas was terminated by the Aquino administration over its allegedly unpaid obligations.
This led to a legal battle that continues to this day. San Miguel’s Ramon Ang (RSA) insists that his company has actually already paid a lot more than the cost of putting up the 1,200-megawatt Ilijan plant, which uses natural gas from Malampaya. He says he’s already paid the government P314 billion as of December 2019, or ten times the cost of putting up the power plant at $700 million.
The outcome of this dispute remains unsettled. But so long as the case is still in court, it’s only appropriate that all officials who supervise the industry should maintain a seemly and impartial distance from the proceedings.
* * *
Even the appearance of indiscretion ought to be avoided, as Caesar’s wife was famously advised. Which brings us to the appearance of conflict of interest involving the current chair of the powerful House Committee on Energy since 2016, Marinduque Rep. Lord Allan Velasco, who’s also the next House Speaker-in-waiting under a term-sharing deal with the current Speaker, Alan Cayetano.
Congressman Velasco’s committee exercises oversight powers over PSALM and the entire power generation industry. But his background reveals a noteworthy depth of involvement with Mr. Ang of San Miguel.
The congressman’s ties with Mr. Ang are personal. His wife Wen Velasco served as RSA’s man Friday. The tycoon stood as the couple’s wedding sponsor or ninong. Velasco’s give-aways or holiday gifts to his fellow House members and staff and well-wishers, as well as those of his wife Wen for her own network of friends and supporters, are invariably San Miguel and Petron products. San Miguel Foundation and Petron Foundation, RSA’s charity arms, are also the main funders and benefactors of her charity projects.
Corporate records show that Velasco was among the top 100 stockholders of San Miguel Corp. and Petron Corp. in March 2017, when he was already chair of the House energy committee. This, despite the legal requirement that a public official must not hold any office that has jurisdiction over an industry or private business within a year of his or her disposing of prior ownership or control in a company within that industry.
It may also be recalled that the congressman’s father, former Supreme Court associate justice Presbitero Velasco, was the ponente for the SC ruling that allowed the conversion of over 750 million sequestered shares in San Miguel under the name of the Coconut Industry Investment Fund (CIIF) holding companies, into preferred shares. It was those same shares that eventually facilitated the takeover by RSA of control and majority ownership of San Miguel.
Congressman Velasco reportedly may have already divested himself of his shares in San Miguel and Petron. If true, it is certainly a step for him in the right direction, but not yet enough. In his future dealings—especially if he comes to assume the top House position—he’ll be expected to exercise more caution and circumspection in his personal and business relationships with personalities and companies over which his oversight mandate from the public ought to come first and foremost.
Readers can write me at [email protected].