Regulatory audit of power utilities

The year 2012 ended with so much to thank our Almighty God for, but it left behind the lingering question: Why does our Energy Regulatory Commission (ERC) keep on approving power rate increases contrary to the intent of the Electric Power Industry Reform Act (Epira)?

Perhaps, a closer look at the law that governs rate setting will help us identify where the problem lies.

Epira’s Section 43 (f), Functions of the ERC, reads: “The rate must be such as to allow the recovery of just and reasonable costs and a reasonable return on rate base (RORB) to enable the entity to operate viably.”

Clear is the fact that the primary objective of the ERC in fixing electricity rates is to allow a power utility, whether it is a distribution, transmission or a generation utility, to recover its just and reasonable cost of service.

The Supreme Court, in its decision in GR No. 166769, gave life to this law and showed its wisdom when it directed the ERC to request the Commission on Audit (COA) to conduct a complete audit of the records, books and accounts of Meralco.

Apprehensive that the Supreme Court directive may not be complied with to the letter, the National Association of Electricity Consumers for Reforms Inc. persistently wrote to the ERC calling its attention to the matter.

As expected, COA’s final audit report showed billions of pesos of “over-recoveries” by Meralco in two years of its operation alone. The over-recoveries discovered by COA referred to utility expenses or costs that were not directly related to the service of providing electricity, thus, these were recommended for refund.

Clearly, a regulatory audit of these power utilities becomes imperative so that only the costs directly related to the service of providing electricity can be charged to their captive customers.

Without an ERC regulatory audit, public interest is sacrificed to the undue advantage of the power utilities which, unbridled, rake in humongous profits, even as a new yoke of oppression is imposed on power consumers.

—PETE L. ILAGAN,

president, National Association of

Electricity Consumers for Reforms Inc.,

[email protected]