Our Complaint with the ERC for a P29 Billion in Overcharges from 2013 to 2018 (Part 2)

David Celestra Tan, MSK
27 February 2021

Part 2

7. Meralco Operating Expenses had not increased proportionately for the same period of 2009 to 2018. Meralco’s operating expenses did not increase much per kwh. In fact it decreased as the volume of sales increased. Operating Expenses per kwh decreased from P1.0594 in 2013 to only P0.9434 per kwh in 2018. These are based on Meralco’s annual reports, to wit:

8. We should not overlook further that under the new Management of Meralco that took over in May of 2010, the operating overhead expenses of Meralco had one year increases in terms of amounts by  22.61% in 2010, 21.48% in 2011, 15.28% in 2013, and 13.05% in 2015. The decreasing per kwh operating costs of Meralco despite such significant yearly increases in amounts, only point to the significant increases in kwh volume of sales that Meralco has been enjoying and the urgent need to mitigate the outdated level of the kwh DSM rate to prevent continuing overcharges and recovery.

9. We calculate that the excess kwh of actual energy sales of Meralco over a 3.5% growth sales that is used for computing per kwh rates, accumulated to 34.35 billion kwh for the years 2013 to 2018. If again we allow half as bona fide rate increases, the excess recovery is at least equivalent to 17.25 billion kwh. So for that five (5) year period alone and using a per kwh DSM rate of P1.38 per kwh, the excess recovery was P23.805 Billion. If we add to that the error of FQ of P5.864 billion in 2013, the total over recovery of Meralco for the years 2013 to 2018 would be conservatively P29.669 billion.

10. Over recovery in 3^rd Regulatory Period of the under-recovery in the 2^nd regulatory period.

These windfall energy sales from 2012 to 2015 also resulted to an over-recovery of the additional P0.15 per kwh that Meralco was allowed by the ERC to recover a supposed under-recovery from the previous 2nd regulatory period. The excess actual sales was about 12 billion kwh for 2013 to 2015 or about P1.8 Billion This additional charge expired in July 2015 resulting to the current rate of 1.38 per kwh DSM.

11. These multi-billion peso over recoveries from Meralco Consumers resulted from higher actual kwh sales than the projection used in translating the allowable annual revenue into per kwh rate for the regulatory periods from 2013 to 2018 and not from any faulty PBR methodology.

12. These annual excess revenues have been evidently one of the major reasons Meralco had been reporting annual returns on equity of about 24 to 25% instead of the 12% the Supreme Court had mandated to be the fair and reasonable return on equity of public service utilities.

13. It is most unfair to the Meralco consumers to allow Meralco to keep those undeserved excess revenues and unduly continue enjoying the benefits of the excess charges for their corporate gain including declarations and remittance of annual dividends and fat bonuses to its executives from revenues and profits that are deviously gained from unsuspecting electric consumers.

14. It is not the fault of the consumers that the DSM rate per kwh of Meralco had not been adjusted to reflect the current volume of sales due to the delay in the updating of the 4^th and 5^th regulatory resets and hence they must not suffer and deserve to be refunded the overcharges without further delay.

15. It is the duty of the ERC to protect the consumers from excessive charges whether intended or not and the similar duty of Meralco as the distribution utility to charge fair, reasonable, and least cost rates and to refund to consumers what they have collected excessively. ERC’s failing to act expeditiously would be a dereliction of its duty to protect the public interest.

16. Allowing the continued retention by Meralco of the excess and undeserved revenues is a violation of the very principle of the Annual Revenue Requirement, the maximum allowed total revenue that Meralco is supposed to charge and keep from consumers per year.

PRAYER

WHEREFORE, it is most respectfully prayed of this Honorable Commission that an ORDER be ISSUED

1. Directing Meralco

(i) to Return the over-recovery to its consumers in the amount of 29.669 Billion Pesos covering the period of 2013 to 2018 plus interest. To provisionally order an immediate refund of at least 50% while the Honorable Commission is validating the windfall energy sales from 2013 to 2018.

(ii) Refund to the consumers another P1.8 billion from the over recovery of an under-recovery of P0.15 per kwh that was allowed for the 3^rd regulatory period

(iii) To investigate who is responsible for using an outdated kwh sales figure in 2013 of only 30.316 Billion kwh as FQ when it was already 30.5 billion two years before in 2011 and 33 billion kwh in 2013, thus resulting to an inflated per kwh translation of the then approved ARR and the consequent overcharging of the consumers.

Other just and equitable reliefs are likewise prayed for.

Pasig City, November 25, 2019.

x-x-x-x

We view Meralco’s voluntary partial refund of P13.9 billion for 2015 to 2020 as a preemptive strategy to avoid a deeper investigation into the length and breathe of the overcharging that goes back to 2013 and amounted to P29.6 billion up to 2018. We estimate that if we include 2019 and 2020, we would be reaching easily P35 billion in overcharges.

What is the difference between “over-recovery” and “overcharge”? Is it just semantics? Technically, “over-recovery” is a regulatory variance and implied to be unintentional. “Overcharge” is a deliberate scheme. In this case, who knows how the wrong projected energy sales of 30 billion kwh was used instead of 32 billion kwh that resulted to a higher per kwh rate of 1.381. Are we going to say that in 2013, the ERC had no way to ensure that the computations of what will be charged to the public involving billions a year are correct?

According to Press accounts, the P13.9 billion Meralco refund is only provisional. The ERC will still hold hearings and determine the amount of Meralco’s actual over recovery.

Your organization will try to complete its over-recovery computation for the years 2019 and 2020 which are not included in our 2013 to 2018 computations of P29.6 billion.

MATUWID NA SINGIL SA KURYENTE CONSUMER ALLIANCE, INC.

Petitioner
Suite 910, West Tektite Tower
Exchange Road, Ortigas Center, Pasig City

DAVID CELESTRA TAN
Co-convenor

Evelyn Viray-Jallorina
Executive Director

Manila Electric Company
Meralco Compound
Ortigas Avenue., Brgy. Ugong
Pasig City, 1604

Office of the President
Malacanang, San Miguel