We commend Neal Cruz for his boldness in expressing his outrage over the unbridled rise in power, water, communications and road toll rates that have become a heavy and unbearable yoke on every Filipino (“Water, power firms overcharging the public,” Inquirer, 2/24/13).
Indeed, the regulators’ function is to fix rates/fees so as to allow utilities to recover their actual capital, plus a reasonable return not exceeding 12 percent. Their profit margin is regulated because they are performing a public service; in other words, they operate to serve a public—not private—interest.
Thus public utilities should be charging rates that are just and
reasonable. This means that the rates must generate, yearly, enough revenues for a utility to recover its annual cost of service—plus a reasonable return on its actual capital investment, based on the annual revenue requirement the regulator has determined and approved, so as to enable the utility to operate viably.
It is important to emphasize that the rates approved by the regulator are only presumed to be just and reasonable until the rate/s is/are able to recover/generate a specific year’s revenue requirement as determined and approved by the regulator. Thus, if the year’s revenue generated is short of the approved annual revenue requirement, there is a shortfall (“under-recovery”), in which case the utility is allowed to file an application for the recovery of the shortfall. In the case of “over-recovery,” there should naturally be a refund and rate-reduction.
The rates, as a mechanism for recovering the actual capital investment of a utility, will naturally have the effect of bringing down the rates every year. But because of regulatory failure, rates continue to satisfy corporate greed at the expense of public interest.
Regulatory failure comes when the regulators simply accept the reports of utilities as gospel truth and give up the power to look into the utilities’ books of accounts, which power is meant to find out if the declared cost of service is true and is indeed directly related to the utility service. Regulators fail when they do not look into pronouncements of utility companies, like Meralco, that they plan to invest funds into the generation business, which investment constitutes a misappropriation of funds. This task is called regulatory audit.
If the regulators will only conduct this audit, numerous costs not related to utility service will be “uncovered” and this should lead to a refund and rate-reduction. A COA audit has always uncovered “unrelated” costs.
With their mouth, regulators express devotion to public service, but their hearts are actually lusting for unjust gain. Aware of this lamentable situation, we are compelled to join Cruz in starting a “consumer revolt” that should put a stop to corporate greed. May more columnists come out and join this revolt, using the might of their pens.
—PETE L. ILAGAN, president,
National Association of Electricity
Consumers for Reforms Inc.,
nasecore2003@yahoo.com