Meralco’s P0.18 Reduction In 2015 Is A Camouflaged Refund of Overcharge in 2011
David Celestra Tan, MSK
The rate reduction of P0.18 per kwh that Meralco announced in July 2015 turned out to be actually a refund of overcharges for the years 2007 to 2011 and not a reduction in rate.
At the public hearing at the Energy Regulatory Commission last January 7, where MSK is an intervenor seeking to determine whether the rate reduction was sufficient, we noticed that the 0.18 per kwh is actually for over-recovery for the Second Regulatory Period which covers 2007 to 2011. Meralco is even calling it “under recovery” in its filing papers apparently so it will not sound alarming to the public.
This is a stroke of Meralco’s hoodwinking genius. The P0.18 per kwh we estimate amounts to P6 Billion a year or a total of P24 billion for the 4 year period up to 2011. Now in 2015 they presented it as a rate reduction for which the Meralco electric consumers are supposed to be grateful. It is a deception to call an “over recovery” an “under recovery” which is the term used when a distribution utility does not charge enough. But when it is returning the money it means they over recovered.
These overcharges validate MSK’s position that the Performance Based Rate making methodology adopted by the Arroyo ERC in 2007 resulted to excessive and illegal overcharges to the Meralco consumers. MSK had filed a petition with the ERC to repeal the PBR because it is a violation of the EPIRA laws requirement that the retail rates must be based on investments incurred. PBR allows charging of projected investments not yet incurred.
The consuming public deserves to know the truth and to see the wolf in a sheep’s clothing.
In June 2015 Meralco petitioned the ERC for an immediate provisional authority to reduce its rate by 15% which translated to an average of P0.188 per kwh. The MSK consumer group is among those who endorsed the immediate approval of the reduction because it will benefit the consumers. It however sought to determine whether the reduction is sufficient. Up to now Meralco had not filed for its regular rate for the 4th regulatory period covering July 2015 to June of 2019.
The next logical question that begs to be asked is if Meralco overcharged to the tune of P6 billion a year up to 2011, what about the distribution rates they charged the consumers for the 3rd regulatory period of July 2011 to June of 2015 for which they charged a higher rate? There could be overcharges also in the range of P24 billion for that 4 year period. This means Meralco had been overcharging its customers all along.
It also means Meralco had been benefitting from those billions of overcharges and using the money as working capital. That is easily P600 million per year and P2.4 billion over the four year period in cost of money savings. Meralco must similarly compensate the consumers for the use of this free capital.
Meralco which is majority owned by Metro Pacific had announced record profits of P18 billion for the current year and had disclosed to the SEC that it had paid hundreds of millions of bonuses to its top executives.
MSK had similarly written the ERC and Meralco to effectively discontinue the on-going hearings which appear to be only for the purpose of justifying the process of Meralcos dividing the net distribution charge of P1.3939 per kwh among its various distribution charges and customer classes. In its letter, MSK said the hearings are moot because Meralco already received a provisional authority for the interim reduction. It asked ERC to require Meralco to file its formal application for the 4th regulatory reset instead of wasting public money on the hearings that will not benefit the public much.
Meralco must be honest in telling its customers that it overcharged P6 billion a year from 2007 to 2011 instead of making everyone believe that it is magnanimously reducing its rate by P0.188 per kwh starting 2015. Why was it calling it an under recovery? Yet to be disclosed is the most probable overcharge for the 3rd regulatory reset covering 2012 to 2015. This could mean another overcharge of P6 billion a year.
We call on the ERC to immediately address these overcharges and save the consumers from further injustice.
Matuwid na Singil sa Kuryente Consumer Alliance Inc.
