Is Meralco Overcharging or Overpricing the Consumers?

David Celestra Tan
08 September 2014

Meralco maintains a high-powered public relations team to varnish their image so they are kind of sensitive on the accusations that they are overcharging their customers. Would it be more palatable to them if we instead refer to their electricity rates as “overpriced”?

Is there really a difference to the consumers? In either case, the customer pay more for the electricity than they should specially when the law clearly mandates a DU like Meralco to supply power in the least cost manner. As a public service utility, Meralco must understand that it will be subjected to higher standards of propriety in the way it conducts business. Distribution of electricity is imbued with public interest.

In my book the customers are being overcharged when there is nefarious intent in pricing the electricity. It is overpriced when the electricity rate is so high because of organizational inability to provide power in the least cost manner. The former is exploitation of the vulnerability of the consumers and the latter is just organizational ineptness or plain callousness.

If we need to make a distinction, overcharging is active, overpricing is passive. Overcharging is a result, overpricing is a consequence. Overcharging is an act of commission, overpricing is act of omission. Just two different ways of skinning the cat.

So is Meralco overpricing your electricity?

Meralco clearly does not want to subject to open competitive bidding the power generation services that it will pass on to the consumers, evidently preferring to self-negotiate and monopolize the distribution utility’s power supply. They determine among themselves how much generation rate to charge the customers. Cheaper and cleaner hydro power is not part of their energy procurement mix.

They appear to be passive in imposing compliance by their power generator suppliers to the terms of the contract and deficient in the vigilant monitoring system of downtime limits and fuel pricing and procurement and consumption efficiency. Is this organizational ineptness, plain callousness, or just lack of appreciation of what a public service utility should be.

They passively accepted the downtimes of their power generator suppliers, turned around and bought the deficiency from the WESM that soared to P62 per kwh. Then they nonchalantly sought ERC approval to pass on the 74% increase in one month rate without demonstrating true concern for the consumers until the public reacted to the hefty increase.

Meralco claims they don’t make money on the generation charges even if their sister companies are among the generators supplying Meralco.

Do these constitute overpricing or overcharging?

Is Meralco overcharging the consumers?

To answer this question we are adopting in the MSK website the 2007 report of PB Associates, the independent consultants hired by the ERC to evaluate Meralco’s then application for their new PBR rates. The report is quite revealing and educational for the consumers.

It is kind of long but try to read it. You be the judge on whether Meralco is overcharging or just overpricing?