Meralco’s rate increases

Concerned citizens are asking Energy Secretary Jose Rene Almendras and ERC Chairman Zeny Ducat to reject the petition for another round of rate increases by Meralco for its so-called distribution, supply and metering (DSM) charges.

The country’s largest power distribution utility which covers a franchise area comprising 23 cities, 88 municipalities and 4.8 million customer connections with a resident population of 19 million and counting, has asked for an increase of P0.41 per kilowatt hour in its DSM charges from the current P1.4917/kwh set just a year ago last May 2009 to P1.9036/kwh by 2015. As noted by the oppositors headed by a certain Genaro Lualhati and the pro-consumer Nasecore led by Pete Ilagan, this P0.41 increase being worked out under the ERC’s newly instituted tranching scheme called Performance Based Regulation (PBR) is no pittance at all, if one considers that for every one centavo increase in Meralco’s rate this translates into a gross revenue of P360 million per year based on its present annual sales of 36 billion kilowatt hours. Thus, that 40 centavo increase translates into a whooping P14.4 billion a year additional revenue for Meralco!

This PBR is actually a misnomer of sorts since it is not Meralco’s performance, that is, providing cheaper, accessible and reliable power, which is being supported but is actually a guaranteed return-on-capital operation for the utility’s private owners. The oppositors believe the increase is not only objectionable, it is downright uncalled for — as in, unwarranted and unjust. And, considering the burdens already being carried by consumers, this additional imposition is definitely unwelcome. In fact, Lualhati has already filed a petition for ERC to abolish the PBR as it is violative of the Constitution and a series of Supreme Court decisions for allowing utilities (not just Meralco) to charge and recover more than the allowable 15 percent annual rate of return (ARR). Part of Lualhati’s petition called for Meralco to refund P39 billion in over charges representing collections in excess of ERC approved rates in 2003 and 2007 as certified by no less than the Commission on Audit (CoA). It was Lualhati’s group which waged and won refunds ordered by the Supreme Court in 2002 and 2003.

Skewed in owners’ favor: If Lualahati’s and Nasecore’s figures are to be believed, the numbers being presented by Meralco before the ERC in support of its petition are not only overstated, these are skewed heavily in favor of the private owners. Consider the figures indicated for its so-called annual revenue requirements (ARR) as provided in its petition in ERC Case No. 2010-069-RC, namely, P52 billion for 2012; P54.9 billion for 2013; P58 billion for 2014 and P60 billion for 2015. Of these requested amounts, more than 40 percent are set aside for return on capital (RoC) which includes dividends for stockholders and investors. Thus, for 2012, the RoC amounts to P23.8 billion; P24.6 billion for 2013; P25.2 billion for 2014 and P25.8 billion for 2015. These RoC figures are well over those allocated for operating and maintenance (O and M) expenses which only accounted for just about 32 percent of total annual revenue requirements for the same period, as follows: P16.5 billion in 2012; P18 billion for 2013; P19.6 billion for 2014 and P21.4 billion for 2015. Nasecore noted that the RoC which is allocated essentially for dividends to shareholders is higher by an average of P5 billion per year than that assigned for operating and maintenance expenses. No wonder, shares in Meralco has been the darling of investors and, if the rate increases are to be granted in toto, this will be a boon to all of them — at the expense of the millions of consumers, of course.

Anti-consumers as well: Finally, the oppositors argued that on the whole, with the DSM charges on top of other charges in the Meralco scoreboard such as generation, transmission, systems loss, cross subsidies and universal charges, among others, these make Meralco’s total charges in the petitions it filed with ERC as anti-consumer as well. Why so? Simply because under the said General Services A application, residential customers will be paying 11 times more than large customers, that is, they will charge P2.9587 per kwh while the latter will be charged only P0.2624 per kwh. In fact, the illustrative DSM rates it advised under its maximum average price (MAP) for all customer classes are just half of that it actually indicated in its General Services A petition, as follows: P1.7056/kwh in 2012; P1.7686/kwh in 2013; P1.8349/kwh in 2014 and P1.9036/kwh in 2015.

In fine, Meralco’s latest petition for rate increases only reinforced the fears of suffering customers that it has chosen to ride herd over them instead of pursuing what many utilities have always been advocating — a kind of cross subsidies where the very big customers can assist the very small or struggling ones with their power requirements. In effect, they are the ones carrying the heavier burden of Meralco’s existence instead of the bigger and thus more capable customers. If indeed this is the case and Meralco has to prove otherwise then the ERC should be prepared to junk this latest petition. The sooner, the better. –Jonathan De la Cruz, Daily Tribune