SC verdict on Meralco power-rate hike

Business Mirror

06 Feb 2014 

 

Written by Butch del Castillo

This is definitely pure speculation on my part. But I’m willing to place a small, friendly wager that the Supreme Court (SC) would, in the end, declare as illegal the P4.15-per-kilowatt-hour (kWh) increase the Manila Electric Co. (Meralco) tried to impose on its captive market in December 2013.

In a way, this forecast is a measure of how strong my faith is in the integrity and wisdom of our SC justices.

Last December, based on a flurry of petitions from various consumer and advocacy groups, the High Court issued a 60-day temporary restraining order (TRO) to freeze the rate increase. Being “temporary,” the rate increase remains hanging like a Damocles’s sword on the heads of Meralco customers. (That’s why many are saying the TRO merely deferred what the entire power sector considers unstoppable or inevitable.)

As I see it, though, the High Court would, in the end, most likely castigate the Energy Regulatory Commission (ERC) for having “committed a grave abuse of discretion” in summarily approving the preposterously high increase being asked by Meralco as a pass-on charge—without formally considering its impact on the electricity consumers.

It would also probably say in its ruling that if the generation-rate increase were truly necessary, legal and justified—then Meralco could always, once again, go through the entire rigmarole of seeking the ERC approval. But this time, the inputs of the consumer sector should be a vital part of that process.

As I see it, the SC would most likely give a lot of weight to the lamentation expressed by the National Association of Electricity Consumers for Reforms Inc. (Nasecore)—that the ERC never gave Meralco’s captive customers a decent chance to oppose or speak out against the proposed increase.

As Nasecore President Pete “Pit Bull” Ilagan himself has put it, “Meralco customers were deprived of their constitutional right to due process.” (Or deprived of their day in court before being subjected to such unusually cruel punishment.)

Ilagan said Meralco customers were completely shut out from whatever deliberations were held at the ERC on the issue of the P4.15-per-kWh rate increase. The ERC summoned everybody else from Meralco and the generation companies—but not from the consumers’ sector, which would be the most affected by the rate increase.

Ilagan said: “It’s as if we didn’t exist. Sila-sila lang ang nag-usap.” And this is precisely why some angry Meralco customers regard the entire ERC as a symbol of regulatory failure or regulatory capture. It simply has done nothing to protect the interest of the very sector it was mandated by law to look after.

Meanwhile, Nasecore wants a major rewrite of the Electric Power Industry Reform Act (Epira) of 2001.

The watchdog group is proposing five major amendments to this law, which are as follows:

• Section 30, Abolition of the Wholesale Electricity Spot Market (WESM). After operating for seven years, the WESM has not attained its objective of providing electricity consumers the power of choice. What is needed are retail outlets for prepaid electricity where prices can be
  competitive.
• Section 43,  ERC functions. The ERC must be mandated to conduct a mandatory regulatory audit of all power utilities that had their annual revenue approved by the ERC. This is to ensure that each utility is applying its revenue to costs that are directly related to the service for which the annual revenue was approved and granted.
• Section 43 (f [i]). Abolition of the so-called Rate Base Revaluation. Revaluation of eligible assets must not be allowed to be part of the “rate base” because market value is not the actual cost incurred in providing capital investment used in the provision of the public service of transporting and distributing electricity. This rate-base revaluation provision is contrary to the Epira, which provides for reflecting the true cost of doing a service.
• Sections 23 and 28. There are too many electric cooperatives. Electric cooperatives must be merged or consolidated by the National Electrification Administration on a regional basis. This will make the government’s job of regulating these cooperatives a lot easier. Mergers and consolidations would achieve economies of scale, improve efficiencies and reliability of service and reduce costs.
• Section 45 (a). Absolute ban on cross-ownerships between and among owners/stockholders of a distribution utility and a generation company. Absolute prohibition would allow for a level playing field in the generation and supply sectors.

source

E-mail: Omerta_bdc@yahoo.com.