Philippine Business Magazine: Volume 8 No.1 - Policy
Last Hurrah
Another look at some of the last few pieces of legislation churned out by the 11th Congress

Stalled Power
The legislative measure that proposes to unbundle the power sector is now on its fifth year in the making. Already in the bicameral conference committee, the power reform bill again got stalled when Congress adjourned sessions in February. Its last chance of graduating from this Congress is in June when the body resumes session - but only for a couple of days to validate results of the May elections.

In its present form (the version being deliberated on by the bicameral conference committee), the power bill proposes the creation of the PSALM Corporation (Power Sector Assets and Liabilities Management Corp.) to own the National Power Corporation's generation assets, liabilities, IPP contracts, and real estate. PSALM will then have to manage NPC's orderly sale and privatization.

PSALM will own a new National Transmission Company (TRANSCO) which will assume the electrical transmission function of NPC. TRANSCO would be open and non-discriminatory to all electricity users. It will also be open to a competitive bid for operation concessionaires for 25 years.

A year from the law's approval, the Department of Energy will establish a wholesale electricity spot market. This market will provide the mechanism to determine the price of electricity not covered by bilateral contracts between sellers and purchasers of electricity users.

Similarly, within three years, retail competition and open access on distribution wires will start. But this is premised on the condition that there is already a spot market for wholesale electricity; unbundled and distribution retail wheeling charges are approved; cross subsidy removal scheme is implemented; and 70% (total capacity) of the generating assets of NPC are privatized.

The Energy Regulatory Board will now be the ERC (the Commission) which will fix a monthly universal charge that will be imposed on end-users by distribution utilities. The charge will also cover missionary electrification and equalization of taxes applied to indigenous sources of energy. As a safeguard against monopoly, until ERC has reduced the threshhold level to 100 kW, no company can own or operate 40% of the installed generating capacity of a grid or 30% of the national installed capacity.

Senator Serge Osmeña predicts a power crisis in 2004 if the bill's passage is further delayed. If the measure is not passed on or before 7 June 2001, it will again be refiled in the next Congress and undergo the same hearings and proceedings in both chambers.

Rewards & Punishments
Employees of revenue-generating agencies of the government will be put on the hot seat when the lateral attrition measure is enacted into law. As it is now, the bicameral conference committee version is awaiting presidential approval following the committee's smooth adoption of the House version (HB8136).

Lateral attrition is the transfer of an employee to a lower post or separation from government service.

With the end-goal of trimming the budget deficit via an increase in government revenues, the measure provides for the penalty of lateral attrition for employees who do not meet their respective revenue or collection goals for the year. On the other hand, the measure rewards government employees who have accomplished their revenue collection goal. Notably, customs employees lead the opposition to this measure since, according to them, this will put undue pressure on them especially now that the Department of Finance has raised the bureau's revenue target.

The senate version (SB 2208) of the measure has held that the implementation of the subject measure shall only be limited within the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC). On the other hand, the House version (HB 8136) calls for the measure's implemention in all revenue-generating government agencies except the Bangko Sentral and Bureau of Treasury. A compromise was made in the final draft of the measure when the House version was revised to qualify that "only government agencies earning at least P100 million per annum (except BSP and the BOT) shall be affected by the measure.

Buyer & Seller's Price
The transaction valuation measure (HB 8623, integrated with SB 2196) has been ratified at the bicameral conference committee and will soon be endorsed for President Arroyo's approval. This new method of assessing the value of imports mandates the usage of a customs valuation system based on the actual agreed price between the buyer and the seller. One salient provision of this measure is that it creates a mechanism to guarantee the accuracy of the declared amount on the invoices of imported goods. This way, government's potential revenues from import duties is guarded.

However, the transaction valuation appears to be much more complicated than the other valuation systems. Proper determination of the customs value requires a thorough analysis of the relationship between the importer and his foreign supplier and the possible existence of covert payments. Notwithstanding, to compensate for this, a post-entry audit is mandated so that the analysis will not hamper the release of the goods in question. Also, transaction valuation may be criticized as a system prone to dumping which may endanger the viability of domestic industries.