Meralco: SC ruling brings relief to consumers

By Lenie Lectura – July 15, 2020
from Business Mirror

The Manila Electric Co. (Meralco) said the recent decision of the Supreme Court (SC), which affirmed the directive of the Energy Regulatory Commission (ERC) to implement price controls for the Wholesale Electricity Spot Market (WESM), has protected consumers against higher power generation cost.

“Meralco is happy to receive the recent SC Resolution which affirmed the ERC’s jurisdiction to set prices in the WESM and confirmed Meralco’s position that the prices for the 3rd and 4th months of WESM should be adjusted,” Meralco First Vice President and Head of Regulatory Management Jose Ronald V. Valles said on Tuesday.

“We thank the ERC for ruling in favor of the consumers, and the Court of Appeals [CA] and SC for affirming the ERC ruling.”

Last month, the SC affirmed the power of the ERC to implement price controls at the WESM, the country’s trading floor for electricity, as part of the ERC’s police power to avoid “unusually high and unreasonable market prices.”

Based on the SC Resolution, WESM prices surged during the 3rd and 4th billing months of WESM operations, with WESM prices reaching as high as P4,903 per kilowatt hour (kWh) and P7,218/MWh, respectively. Meralco requested the Philippine Electricity Market Corp. (PEMC) to investigate this matter and the PEMC Market Surveillance Committee concluded that certain market participants behaved anti-competitively and abused market power. Eventually, the ERC set the WESM settlement prices at NPC (National Power Corp.) TOU (Time of Use) rates, which the CA and SC affirmed.

The amount involved was almost P9 billion, translating to what would have been an additional imposition of P6/kWh in generation charges.

“This Resolution is a welcome relief to the consumers, especially at this time of pandemic, as there would be no additional burden to consumers. If the WESM prices were not adjusted, this would have translated to an increase in the generation charge of its consumers of about 90 centavos and P2.05 per kilowatt hour for the supply months of September and October, 2006, respectively which we will be passed on to consumers,” said Valles.

In upholding the ERC’s order, the SC pointed out that the object in applying TOU rates was not merely to protect consumers but also to set the WESM settlement prices at reasonable levels, “since there was a clear evidence of unusually high WESM prices during the subject periods. The ERC validly exercised its regulatory power pursuant to the police power of the State when it imposed the commission-approved TOU rates as a form of price adjustment or price control.”

“Here, the unusually high and unreasonable market prices for the subject billing periods which necessitated the ERC to step in and exercise its police power as mandated by the EPIRA (Electric Power Industry Reform Act), cannot be overemphasized,” the SC said.