New ERC leadership spells hope
MONTHLY, MERALCO blasts us with media advisories on the rise and fall of its rates—bragging efficiency when it goes down, blaming generation when it increases. The constant refrain: Hindi nagtaas ang Meralco distribution charge.
While true, it is hardly half the truth. Meralco’s annual distribution rate, including the overcharges, was set by the Energy Regulatory Commission (ERC) over four years ago and under the agency’s anticonsumer rate-setting rules called performance based regulation or PBR, that rate was placed beyond our reach and review over a four-year regulatory period.
Meralco has not raised its monthly and annual distribution charges because it is the ERC that had set it in a rate-reset process done just once every four years.
Every time we try to look into how Meralco spent the money it collected from us consumers, all Meralco and the ERC say is: You wait for the next rate reset. That’s the rule under the PBR.
Here’s an insight on Meralco’s monthly or annual distribution charge which does not rise or fall: under return on rate base (RORB), that was about P0.76/kWh; under rate unbundling, P0.97/kWh; under PBR which started around 2007, P1.64/kWh. Meralco’s annual net earnings: under RORB, about P2.7 billion; under PBR today, over P18 billion! And there has been no increasing yet by Meralco of its monthly distribution charge!
The 3rd regulatory period (3RP) for Meralco lapsed June 30, 2015. Under ERC rules, Meralco must account for the P226 billion or so it charged us during 3RP: P61 billion for operating expense; P37 billion for capital expenditure; P24 billion for underrecovery; P23 billion for depreciation; and the highest single item—P79 billion for return on capital, which was P20 billion in 2014 alone, resulting in Meralco’s P18-billion annual net income. We looked forward to the rate reset as the day of reckoning.
But the ERC denied us that day. The ERC failed (why, unexplained up to now) to issue the rules for rate reset as mandated by the PBR; thus for the next regulatory period starting July 1, 2015, Meralco applied for and got ERC approval of an interim rate, without having to account at all, for the P226 billion collected during 3RP. The ERC’s failure to discharge its duties under its own rules has become the cover for the likes of Meralco, National Grid Corp. of the Philippines, and other utilities to avoid/evade accountability for the billions of pesos collected from captive customers. And there are many questionable costs and charges awarded to Meralco—for starters, a P2.2-billion fund for consultants and P1.7 billion for advertising (to pay for the advisories?).
There has been a changing of the guard at the ERC, and these monumental regulatory failures were essentially the failings of the old guard. Maybe there is hope. Maybe the new ERC leadership will ring in real and substantive change for the exploited and abused captive customers of the electricity business. We hope.
—BUTCH JUNIA, [email protected]
