ERC reduces Meralco’s Opex to ‘PDAF’

Last Sept. 9, Meralco launched a variant of its advertising campaign dressed up as “Meralco Advisory.” Cleverly packaged as news, it explained the last rate hike as generation/transmission cost (a factual statement) but subliminally raised Meralco’s no increase in rate—a spin, knowing that its DSM (distribution supply and metering) rate is fixed annually and was bloated from P0.79 pkwh in RORB (return on rate base) to P1.63 pkwh in PBR (performance-based regulation) after the Energy Regulatory Commission (ERC) gave a P0.0254 pkwh increase in July. This increase Meralco has to explain, not spin.

A mixture of brag and helpful tips, the new TVC (TV commercial)  is passed off as an advisory, creating a new TVC genre: Advertisory!

Utility advertising is actually restricted to information useful to customers. The Commission on Audit previously disallowed Meralco ads, saying,  “Meralco operates in a captive market (thus) goodwill and advertising expenses are not considered necessary in its operations and are not required and relevant to the provision of the electric power service.”

But the ERC not only approved Meralco’s proposed advertising budget of P1.448 billion, it even added P347 million to make it a whopping P1.795 billion.

In Case No. 2010-069 where the ad budget was approved, the ERC said “that goodwill and advertising expenses are not necessary and relevant to the provision of electric power service, thus it (ERC) made a downward adjustment by P69.09 Million” (Page 92, Meralco Final Determination,  ERC Case No. 2010-069RC, June 6, 2011).

That is a big lie! The P69 million claimed by the ERC as “downward adjustment” is in fact the average annual increase the ERC granted to Meralco. For regulatory years 2013 and 2014, which span calendar year 2013, the additional advertising grant of the ERC to Meralco is P148.9 million.

Also alarming is this footnote in the “Approved Operating  Expense” table: “…The allocation per line is indicative only and Regulated Entities are NOT REQUIRED (underscoring supplied) to adhere strictly to these. Control and verification will occur based on total expenditure” (Page 105, Meralco Final Determination).

With this kind of latitude and absolution given up front by the ERC to Meralco, does this not reduce the Opex (operational expenses) to a Meralco PDAF (Priority Development Assistance Fund), to do with as it pleases and to later bury in the “total expenditure”?

Can the ERC be held accountable for the blatant lie in its decision?

What can we do in the face of this flagrant abuse/misuse of the ERC’s regulatory power?

—ROMEO L. JUNIA, [email protected]