This pertains to the news item ?Meralco cuts rate.? (Philippine Daily Inquirer, 2/6/09) Manila Electric Co., or Meralco, announced a reduction of P0.05 in its generation charge from P4.50 per kilowatt-hour in January 2009 to P4.45/kWh in the February billing cycle. This is a much welcome relief for the consumers, especially those companies with big power consumption and those engaged in global competition.

It should be noted though that this monthly adjustment in Meralco?s generation charge stems from its having more than one source of electricity. While it used to source all its power requirements from the National Power Corp., Meralco now also buys 5-10 percent of its power requirement from the Wholesale Electricity Spot Market and 55-60 percent from its three independent power producers. Where to buy is a decision that belongs solely to a distribution utility (DU), like Meralco, as it is the one mandated to ensure the stable supply of electricity to its market, which is a captive market because of its monopoly of the distribution business ? a monopoly that will remain even when open access and retail competition are implemented.

While a DU is not supposed to earn a single peso from the selling of electricity, cross-ownership with generation companies allow the controlling interests to go around this policy and to bleed the suffering consumers with higher generation charges sealed through IPP contracts.

But looking back at this generation charge of Meralco, from an all-year low of P4.19/kWh in February 2008, it went to an all-year high of P5.03/kWh in November 2008. Compared with other private DUs and electric cooperatives in Luzon, their generation charge is more or less P3/kWh only, lower than Meralco by more than P1/kWh

This makes us wonder why Meralco is allowed by the Energy Regulatory Commission (ERC) to charge its captive customers more than P3/kWh for generation. Sec. 23 of the Electric Power Industry Reform Act provides that a distribution utility shall supply electricity at the least cost manner to its captive market subject to the collection rate approved by the ERC. Further, why does ERC allow automatic charges that allow this adjustment on a monthly basis? It is our understanding that the process of regulating electricity rates requires public hearings before any rate adjustment is effected in order to protect public interest. Don?t the automatic charges contravene this?

We fervently hope that the new ERC chair will have the strong resolve to implement the necessary reforms in regulating electricity rates under its ?motu proprio? powers.

PETE L. ILAGAN, president, National Association of Electricity Consumers for Reforms Inc., 680 Quirino Ave., 10 Bayside Court Compound, Tambo, Parañaque City