Unfortunately, science has yet to provide us the means to accurately predict the occurrence of earthquakes. That particular shortcoming does not deter one congressman from insisting the power plants predict earthquakes nonetheless – and force the power generators to orchestrate work outages with the occurrence of quakes.

Rep. Carlos Zarate of Bayan Muna, from the same political network that also insists the flustered Abu Sayyaf raid on Bohol was a US plot, wants the DOE to pressure power supply players to, well, basically predict earthquakes. He is simply out to make political hay out of saying ridiculous things.

True, the “swarm” of quakes we experienced recently, especially in the Batangas area, momentarily disrupted supply. But there was no major damage sustained by any of the plants.

We do expect a spike in electricity pricing over the next couple of months. The uptick in electricity pricing will be due to a host of factors, principally the thin power reserves that happen during the hot months when there is heavy use of air conditioning.

Before the Holy Week break, the transmission company raised supply alerts several times especially during the critical early afternoon hours when consumption demand peaks. The alert level was raised to red after the Bantangas quake when about 1,550 MW was momentarily lost. The DOE, however, fired up the Malaya Units 1 and 2 to cover the deficit.

The Malaya plants are reliable but expensive because they run on bunker fuel. They are old giants built when oil was cheap. They are kept in reserve most of the time. The Malaya plants have a combined capacity of 450 MW.

If quakes are unpredictable, the dynamics of market forces are most predictable. When supply is thin and demand high, electricity is priced higher. As expected, power prices at the wholesale electricity spot market rose along with the average daily temperature.

If demand remains unrestrained and supply remains thin, power will certainly cost more. If power supply remains tight, the voluntary load reduction program kicks in. Under that program, large malls and factories turn on their diesel generators. They will be compensated to offset the costs of running these most expensive sources of energy.

While expensive, running the small diesel generators is certainly cheaper than enduring rotating brownouts.

Resorting to diesel plants at this time will be especially expensive. Over the past two months or so, fuel prices have risen due to the combined effects of OPEC cutbacks and the depreciation of the peso. That pushes up our power costs.

Some vigilance, however, will have to be exercised to prevent unscrupulous suppliers from taking advantage of the situation. The DOE assures us it is constantly monitoring trades at the electricity market to check speculative activity and anti-competitive behavior among the suppliers.

So far, it does not appear that power shortages are imminent and brownouts avoidable. Meralco, which distributes power in the metropolitan region, assured the public that no damage was incurred by its system. But consumers are also told that higher power prices for May are to be expected for all the reasons cited above.

Settlement

For several days now, the market was abuzz with rumors a Philippine company is due to receive a hefty payout from a UK company as part of an out-of-court settlement. Newspapers reported the event mainly in blind items. Now the story can be told and the parties named.

Prudential Guarantee and Assurance (PGA) faithfully served an aviation-related client for two decades. For reinsurance services, PGA chose UK-based reinsurance firm Marsh. The latter earned healthy commissions from this deal.

Sometime in mid-2016, Marsh suffered an exodus of key personnel, including aviation assessors and experts. In the face of that development, PGA decided to bring its business to another reinsurance firm.

Marsh did not take kindly to this business decision. The UK firm set an appointment with the CEO of the aviation company and brought sensitive documents and transaction summaries to the meeting. Marsh tried to convince the aviation company that PGA was overcharging for the insurance coverage it provided and goaded it to shift its business to another non-life insurance company that continued to reinsure with the UK firm.

That move by Marsh is highly unethical and very likely illegal. The documents Marsh brought to the client were the lawful property of PGA and Marsh had no right to disclose it. The relationship between insurer and reinsurer is bound by a number of non-disclosure and confidentiality agreements. Most important for PGA, the accusation it was overcharging its client is unfounded. Marsh twisted the facts by excluding cost considerations such as taxes and government fees.

PGA, in November last year, put together a top-caliber team of lawyers and the case to the UK High Court of Justice. When the facts were presented, Marsh realized it was in an indefensible position. In order to avoid higher penalties, the UK reinsurer offered an out-of-court settlement.

Robert Coyiuto Jr., CEO of the Filipino insurance company the brought the suit to the UK court has apparently agreed to settle. The settlement amount, it is said, reached nine figures – in British pound sterling presumably.

More than the settlement amount, which is a windfall by any measure, this legal victory sends a clear signal to foreign firms doing business with Filipino companies: no unethical corporate behavior will be tolerated. Marsh, for its part, is hurting not only from the huge payout it must make soon but also from the reputational costs it incurred.