Power dilemma

The power rate hike case that the Supreme Court will hear next week involves a classic dilemma: Should a polity prioritize its needs as a market or as a community? In an ideal world, a young and growing country like the Philippines should not have to choose; in the real world, however, the choice can be both unavoidable and stark.

For the Manila Electric Co. and other industry players, an adverse ruling would mean an uncertain economic climate, diminished profitability and the high possibility of rotating power outages in the summer. Already, Meralco had warned the high court that even a temporary restraining order “damages all power industry participants, the public, and ultimately, the national economy as a whole.” The stakes cannot be greater.

For power consumers, an unfavorable decision would mean massive increases in electricity bills: If not for the TRO issued by the high court two days before Christmas, Meralco consumers’ electricity bill for January 2014, for instance, would have reflected a whopping generation charge of P10.23 per kilowatt-hour. The stakes cannot be more personal.

If we assume, for the moment, that all the parties to the case have the people’s best interests in mind, the Supreme Court will have to decide based on its own appreciation of those same interests. If that happens, we hope it will focus on what we think is the fundamental issue: Is a utility’s legal right to pass on additional costs to the public in truth constitutional? If—as President Aquino himself hinted the other day—Meralco had made a bad business decision by buying from the Wholesale Electricity Spot Market at “really high” rates when the shutdown of the Malampaya supply was a “foreseeable event,” should its customer base pay for the mistake through passed-on added costs? To phrase it another way: Is the privilege to serve a basic need of the public’s also an eternal guarantee, not only to make a profit, but also to keep profit margins regardless of condition or circumstance?

The amended petition from the Makabayan group of party-list lawmakers now includes this argument: “Automatic pass-on is patently anticonsumer because it contradicts the distribution utility’s obligation to secure the lowest priced supply. Why would a distribution utility even worry about high rates in the [WESM] when it knows that these rates could easily be passed on to consumers?” Exactly.

“There is no limit or cap on the automatic recovery or pass-on policy. The sky is the limit.”

This argument is potent not only because it raises the question of limits that is fundamental to any self-regulating, self-adjusting democracy: At what point does the profit motive become reckless greed? It is powerful also because it applies to the case even if the feckless Energy Regulatory Commission or Meralco itself had followed the law to the letter.

But did they?

We note that the high court had widened the scope of the case to include more respondents. Six of Meralco’s power suppliers were impleaded; the high court also ordered the inclusion of the WESM operator, Philippine Electricity Market Corp. We welcome these developments, because they mean that the high court takes the charge of collusion seriously indeed. Including SEM-Calaca Power Corp., Masinloc Power Partners Corp., Therma Luzon Inc., San Miguel Energy Corp., South Premiere Power Corp. and Therma Mobile Inc. in the case cured a defect in the original petition, which alleged that the suppliers had colluded with the ERC but did not implead them. And including PEMC as a party to the case means the issue of price manipulation, of whether WESM prices were artificially high, can be addressed squarely by the high court.

The preliminary conference that the Supreme Court conducted among the petitioners and respondents last Monday allowed the parties a close look at some of the legal issues the justices wanted debated at the oral arguments on Jan. 21. There is the roiling question of collusion and price manipulation; there is the constitutionality of the automatic rate adjustments in the Electric Power Industry Reform Act, as amended; there is also the issue of ERC approval.

It is a debate that electricity consumers across the country, not just Meralco’s 5.3 million customers, will be following very closely.