Abolishing the ERC and Creating a New Regulatory Agency are not the Keys…it is Heart and Spirit (Part 2)

David Celestra Tan, MSK
27 May 2018

Part 2

Many of the Problems of the ERC have been self-inflicted

2. If the ERC had the right regulatory soul for the consumers and faithful to its clear mandates under Section 38 and 43 of the EPIRA law, it would have interpreted Section 43(f) morally and did not effectively deregulate the profits of the distribution sector like Meralco which now makes a 25% return on equity every year instead of 12%.

In fairness, the current Commissioners did not write these. However, we wish they were more willing to rectify the situation under their watch in the last 4 years. Your consumer organization MatuwidnaSingilsaKuryente Consumer Alliance even filed a petition with the ERC for a change in the PBR rule. They were not sympathetic. Meanwhile the estimated overcharge of about P0.75 to P1.00 per kwh in the Meralco area continues.

3. The ERC could have protected the consumers by requiring the competitive bidding of power supply contracts for regulatory approval. They did not need the DOE to make it a policy. That could have been a regulatory prerogative. Section 45 of the EPIRA while allowing the contracting of power by DU’s with affiliated companies, was silent on the need for bidding but did not also prohibit bidding. Protecting the public interest should have been the defining soul of the ERC and they could have required so.

And when the DOE made CSP a policy and when the ERC itself adopted its own rules to implement it, it inexplicably postponed it thus opening the floodgates for negotiated contracts that evaded its own CSP policy. It is hard to fathom.

4. Treason of Rule 11 and ERC’s own rules for determining “concentration of capacity” limits are a continuing ruse.

The EPIRA Law under Section 45 also limited the ownership, operation, and control of generation capacity by a group to 25% of a national demand and 30% of a grid demand. Rule 11 of the EPIRA Law blatantly dropped “ownership” and “operation” and limited the prohibition to only “control” in determining concentration. The result is a sister company of a DU like MeralcoPowerGen can own majority shares of a lot of power plants contracted with Meralco but it will not count against their domination limits if they have a partner “control” the capacity.

The old ERC dutifully wrote its rules for determining market concentration according to the limited view of Rule 11.  However, there is evidence that former ERC Chair ZenaidaDucut and Executive Director Saturnino Juan tried to rectify the situation by passing a new formula in determining market concentration by including an “ownership” test and “operators” test in addition to the “control” test.

This new rule was “deferred” by the ERC on that fateful day of March 15, 2016, same day and Commission session when the CSP implementation was extended by almost six months to April 30, 2016.

5. The Travesty of Systems Loss Averaging

The ERC is supposed to have passed a rule limiting the systems loss of private distribution utilities like Meralco to 8.5% (recently they claim the limit is being reduced up to 6.5%).

So why do we captive and commercial customers in the Meralco area pay about 9%. That is the travesty of systems loss averaging that the ERC is allowing Meralco. They charge large industrial customers only 3.5% systems loss but chargers us 9 to 10% and ERC is allowing it as long as Meralco’s average is less than 8.5%.  Meralco has been boasting that their average is 6.75%. We captive customers use and pay for about 60% of the energy sales of Meralco and we are charged higher than the limit, just because of systems loss averaging.  And the process of computation is even less transparent. The recent announcements of lower systems loss means little to consumers as long as it is averaging. What is just is for Meralco to charge the maximum of the new 6.5% to any customer. It is their right if they want to charge industrial customers less but no consumer should be charged higher than the legal limit.

6. Judicial Processes

MSK has been filing petitions at the ERC and making an effort to contribute to the democratic processes that is supposed to be its hearings. One rude awakening for us in trying to represent the consumers is to realize that the ERC processes are so enamored with being “judicial” and there is little effort in using the “quasi” prerogative to protect the consumers.

Consumers cannot appear at the ERC and argue meaningfully unless it follows trial rules of court. You need a lawyer for that. And how many consumers can afford to hire lawyers just to present their case.  They are against the well paid Meralco lawyers, whose fees are ironically paid for by the consumers through the “regulatory compliance” budget of Meralco as approved by the ERC. Talk about injustice and insult to injury.

Our observation is the ERC in its public hearings, behaves more like an impartial judge in a court trial and the consumer advocates the complainants. The ERC cannot be an impartial judge in these proceedings. It has its own mandate to regulate and assure fair and reasonableness of applications and not judge the objections of the consumers. Consumer representatives are there only for additional input.  The ERC must interrogate and cross examine the witnesses and presentations made by the DU applicants.

This has been resulting to the failure of the ERC to consider legitimate consumer concerns because they are silenced by rigid trial and legal processes that gags consumers from fairly expressing their views.

Perhaps they should add a “consumers only” hearing in the process,  the objective of which is to hear and understand the concerns of consumers for the Commissions consideration. No interference from the highly paid wily lawyers.

7. Motu Proprio duty to guard against anti-competitive behavior and cartelization of power

Things are out of hand in the continued monopolization, oligopolization, and cartelization of the power generation sector..The five partners of MeralcoPowerGen own and control 14,000mw of the country’s 16,000mw installed generating capacity.How can there be true competition? The EPIRA law is very clear under Section 45 in the motuproprio duty of the ERC to investigate the occurrence of these anti-competitive behavior. Wikipedia defines “ Motuproprio” as Latin meaning “on his own impulse”. It describes an official act taken without a formal request from another party. The EPIRA law is clear under Sections 43, 45, and 70 on the ERC’s legal mandates that it should perform “motuproprio”. No need for consumer groups to file motions.

Your organization MSK had filed a petition almost a year ago for ERC toinvestigate the evident cartelization of Meralco’s and the country’s power generation supply.If only to try to point out to the ERC things of public interest that are being overlooked. Sadly, there seem to be no interest in stepping up to such clear patriotic and mandated duty…..and eerily no one else in government is raising a hoot including the normally cantankerous Congress.

8. Independence of the ERC Commissioners

The kind of independence that the ERC Commissioners need that can serve the electric consumers is the one from their heart, mind, and spirit….to make judicious decisions for the best interest of the consumers. This cannot be legislated.

Abolishing the ERC and creating a new one however will not change things for the better because that is not where the problem is. The country needs to do a better job at choosing future commissioners. The current crop of commissioners are known individually to be professionals with high level of integrity in their previous careers. Why they have been acting they way they have as a collegial body is quite perplexing.One misguided cow leading the herd to the promised land?

Creating A Better Commission (note, not commissioners)

Future reform legislation for the remaking of the ERC should consider rules for better choices of Commissioners….rather creating or forming a better Commission.  Like potential commissioners cannot hold or run for public office from Mayor and up to Vice-President five years before and after being a commissioner. Like Lawyer Commissioners should be chosen by the President from a short list of three (3) endorsed by the Lawyers League just like choosing the Justices of the Supreme Court. The CPA Commissioner can be endorsed by the PICPA. New commissioners should be required to hold dialogues with consumer groups and stakeholders so they get first hand the concerns of electric users.  These still are not guarantees but it gives the consumers a better chance of not getting handpicked commissioners by vested interests.

In the end though the quality and integrity, and the marching orders, of the ERC Commissioners as a body depends on the appointing authority which is the President of the Philippines and to some extent his DOE Secretary.  Let us hope President Duterte remains true to form in his genuine interest to improve people and country.  This also cannot be legislated. It is in the heart, spirit, and will.

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
Matuwid.org
david.mskorg@yahoo.com