SC hears oral arguments on petitions against power-rate hike

Business Mirror

20 Jan 2014 

 

Written by Joel San Juan

THE Supreme Court (SC) is set to hear on Tuesday the oral arguments of the parties involved in the two petitions seeking to nullify the recent P4.15 per kilowatt-hour power-rate increase by Manila Electric Co. (Meralco) for being unconstitutional.

The Court earlier directed the petitioners and the respondents in the case to focus their arguments on whether the Energy Regulatory Commission (ERC) violated the consumer’s right to due process and a provision in the Electric Power Industry Reform Act (Epira) requiring it to protect the public from market abuse; on whether the amendment to Section 4(e), Rule 3 of the Epira’s Implementing Rules and Regulation which allows automatic rate adjustments or increases to recover generation cost violates due process of law; and whether the ERC resolution allowing rate adjustments proposed by Meralco on December 9 is valid.

Other issues expected to be tackled by the parties include whether the automatic rate adjustments to recover generation cost amount to a surrender of the ERC’s regulatory function in violation of  Epira; whether or not Sections 6 and 29 of the Epira are unconstitutional in declaring that (a) power generation supply are not public utilities and (b) their charges are beyond regulation by the ERC; and whether the 60-day temporary restraining order (TRO) issued by the Court on December 23 should be lifted or not and if refund can be granted.

Among the petitioners are groups led by Party-list Rep. Neri Colmenares of Bayan Muna and consumer advocates led by National Association of Electricity Consumers for Reforms (Nasecore).

The two petitions have been ordered consolidated by the Court, while the third petition filed by Party-list Rep. Fernando Hicap of Anakpawis that also questions the legality of  the power-rate hike but raises the issue on universal charge that was not raised in two earlier petitions, has been treated as a separate petition.

The petitioners will be the first to argue against the power-rate hike with an allotted time of 30 minutes based on the eight-point guidelines issued by the Court last week, after which the counsels for petitioners would face interpellation by members or justices of the SC.

After the petitioners, former Associate Justice Antonio Eduardo Nachura, the counsel for respondent Meralco, will be given 40 minutes to argue in defense of the power hike.

On the other hand, the respondents Department of Energy (DOE) and the ERC will share 30 minutes to present their arguments through the Office of the Solicitor General.

The government, particularly the Office of the Solicitor General that represents the DOE and the ERC, will then have its turn to face the high tribunal to explain its approval of the rate hike.

Intervenors will have the 30 minutes to argue for their positions while other respondents including the Philippine Electricity Market Corp. (PEMC) will be given 40 minutes for their arguments.

“In case there will be more than one lawyer that will argue for a party, the lead counsel shall determine how to share the time allocation with their co-counsels,” the SC ordered.

The Court had also compelled Energy Secretary Carlos Jericho Petilla, ERC Chairman Zenaida Ducut and PEMC President Melinda Ocampo to appear during the oral arguments.

The Court said the three officials are expected to provide technical clarification on issues pertaining to processes and procedures related to power hike.

Meralco has  attributed the abrupt increase in the generation cost to  supposed maintenance shutdown of the Malampaya facility that supplies natural gas to three  major power plants —Ilijan, San Lorenzo and Santa Rita— which supply an aggregate capacity of 2,700-MW electricity to its franchise area.

It also said the shutdown of Malampaya coincided with the scheduled maintenance of two other plants, Pagbilao 2 and Sual 1, which also collectively contribute over 950 megawatts to its requirements.

Meralco said because of the events, it was forced to buy expensive power from the Wholesale Electricity Spot Market.

The petitioners, however, argued, that the ERC committed grave abuse of discretion in approving Meralco’s proposal to pass on to consumers the increase in generation cost without complying with the requirements under Epra.

The petitioners cited ERC’s failure to conduct a public hearing prior to the approval of Meralco’s power-rate increase and the power firm’s proposal to pass on to consumers the increase  in the generation cost for November 2013 violates the Epira law.

According to the petitioners, the ERC under Section 43 of RA 9136 of the Epira law, is mandated to promote competition and penalize abuse of market power in the restructured electricity industry.

More revenue in scrapping VAT

A lawmaker on Monday said the government could still expect to double or triple the amount of revenue once the 12-percent value-added tax (VAT) on power rates is scrapped.

Rep. Romero Quimbo of Marikina City, chairman of the House Committee on Ways and Means, said he foresee that the government income will be doubled or tripled when foreign investors start to come in due to low power rates.

“More investors mean more jobs. More jobs mean more revenues. More revenues mean more government projects,” Quimbo, an ally of President Aquino in the ruling Liberal Party, said.

Quimbo suggested that removing VAT on power generation and distribution could be a way to reduce electricity rates.

The lawmaker is looking into the possibility of implementing a fixed tax scheme on power companies, saying, of the three stages of power production—generation, transmission and distribution—generation and distribution phases are imposed with 12- percent VAT, which make a consumer pay a total of 24 percent.

If the said tax will be removed, that will reduce the power charges by at least 85 centavos to P1 per kilowatt- hour, according to the lawmaker.

“Do not look that the government will lose some P30 billion in taxes but look forward for the investments that will come in because of the lower power rate,” Quimbo said.

Once investors pour their capital in the Philippines, he added the country’s unemployment rate—which stands at 7.3 percent or 2.99 million Filipinos—will decrease.

On its part, the Palace said the proposals to remove the 12-percent VAT on power would need further study because tax is a major source of revenue of the government.

(With Jovee Marie N. dela Cruz)

Epira

Meanwhile, Quimbo also assured that Epira will be passed before the 16th Congress ends in 2016.

“Epira law is not bad per se. There is no doubt that the new law will be passed because we are aiming to lower the cost of electricity. There are some provisions needed to be amended and there are some new provisions needed to be incorporated,” Quimbo added.

Quimbo also threw his support behind the proposed House Bill 3676 filed by Rep. Ben Evardone of Eastern Samar seeking to prohibit cross ownership on distribution and generation companies to prevent possible collusion that supposedly fired up rising power cost in the country.

He said there is a need to amend the Epira to “prevent the cross-ownership of the generation, transmission and distribution sectors.”   source