Right Complaints but Wrong Questions on Meralco’s Shockingly High Electricity Bills During the ECQ and GCQ Period.

David Celestra Tan, MSK
03 July 2020

Your organization was excited when it was invited to participate in a Zoom Meeting called by the House Committee on Energy yesterday, July 2. It was live streamed through the House Facebook page starting at 130pm and lasted for about four (4) hours.

Thousands of Meralco consumers have complained about their shockingly high electricity bills that they received for April and May during these on-going Covid-19 Quarantine periods. Their shock magnified by fear because of their diminished ability to pay for loss of jobs, income, and businesses. Add to that Meralco’s threat that they will start disconnecting power for unpaid electric bills by September 30, 2020.  Hundreds of thousands of Meralco customers are shaking in their boots (or slippers).

One Congressman rightly pointed out that millions of Meralco consumers would have no chance to pay by September even by installments for the excessive bills that will be on top of their current consumption (Sorry po I missed his name). He said Most of the consumers will need to prioritize buying food for their families from whatever income they can make under the expected consequent economic depression. The “Ber” months that Filipinos look forward to will be bleak.

The official title of the proceedings was “Inquiry on the High Electricity Bills: Meralco’s Report on their Actions Made on the Alleged Irregular Charges to Consumers during the ECQ and GCQ Period”  

House Energy Chair Lord Allan Velasco presented to Meralco the samplings of consumer complaints his office had received. Unexplained and excessive kwh billing, estimated billings and Meralco’s failure to do meter reading,  failure to credit payments that were made, increased billings even if their house was unoccupied, etc.

Attending in seeming full force were government officials who can do something about the problem. ERC Chair Agnes VST Devanadera and her team. Top officials of the Department of Energy, many Congressmen, and of course the top officials of Meralco led by its President Rey Espinosa, no less, and Chief Legal Officer Atty. Ronald Valles.

Invited to represent the consumers were Laban Konsyumer, Power for People Coalition (P4P), your organization MSK, and Bayan Muna Chairman Neri J. Colmenares.

After an hour of the proceedings and presentations, it was clear that Meralco’s system was overwhelmed and struggled through excessive, inaccurate, and outdated monthly billing statements.

ERC’s efforts appeared are concentrated on helping resolve thousands of similar complaints with Meralco. With focus on whether Meralco was complying with ERC’s “Advisories”. Both Meralco officials and ERC Chair Devanadera were trying to assure consumers that the billing problems will be corrected.

Meralco officials of course are unperturbed. They just need to labor through implications of organizational incompetence.  That they can survive, for these are questions that they can eventually answer and then consumers will still be made ”responsible” for their “electric consumption”. Or their electric service will be disconnected come September 2020.

Listening through the questions, 75% were like served up, in basketball jargon, hanging “Alley-oop” questions that Meralco can easily handle and slam dunk.

The normal suspects in Meralco charges? Those they can eventually explain. Their kwh reading will eventually be corrected and customer payments recorded. ERC might be able to convince them to waive certain fees probably worth a P100 million to pacify the public. They might agree to extend the disconnection period by another 30 days. (Enough time for you to mortgage your properties and ATM so you can pay their bill before Christmas).

Will these really meaningfully alleviate the consumer bills that skyrocketed to 3 or 4 times their normal bill? Do these really provide a solution for the “High Electricity Bills during the ECQ and GCQ Period”?  If the question eventually boils down to whether a Meralco customer is legally obligated to pay for electricity consumption that had registered in their meters, the consumers will lose. And all ERC will be doing is to help explain things to the public and perhaps ask Meralco to spread the pain.

Are we, the consumers, the Congressmen, and the ERC and DOE,  really reduced to begging Meralco to show sympathy to the suffering nation by “condoning” charges to the consumers because of this pandemic?

In Search for relief, are we really asking the Right Questions to address these Right Complaints?

In the Zoom Meeting No. 5, your organization MSK presented to the House Committee and to ERC Chair Devanadera, the issue of the imminent over-recovery by Meralco of its approved annual revenue and hence a violation of the regulatory limit on their PBR rate. 

1. We tried to point out that Meralco has different DSM rates (distribution, supply, and metering) for different types of customers. In general, low income, regular customers, and large industrial and commercial customers. The DSM charge for those consuming 200kwh and lower is P1.88 per kwh. Those of regular customers consumer up to 5,000kwh is charged P2.98 per kwh. And those large industrial and commercial customers a low P0.82 per kwh. (Take note of the disparity)

2. These per kwh rates were based on assumed kwh sales to each customer class way back in 2013. If we assume that about 60% of Meralco kwh sales are consumed by the two residential groups, the 40% is consumed normally by the industrial group for which Meralco charges only P0.82 per kwh. Just for your perspective, of Meralco’s 6.5 million customers, the large industrial and commercial group is less than 1% or 65,000 But they consume 40% of Meralco’s energy sales.

3. Now during this ongoing Covid-19 pandemic, something happened that, as Chair Devanadera said, “not envisioned when the rules were established”. Meralco’s sales to the large industrial and commercial customers dropped significantly by at least 75% due to the ECQ and GCQ lockdowns. So they lost a market for about 700 million kwh a month that they normally sell at P0.82 per kwh. Or P574 million a month. 

4. On the other hand, because residential customers had to stay and work at home under ECQ lockdowns, their consumption increased by 50 to 150% in kwh. Their April and May bills reflected these in addition to what Meralco claims are consumption under estimated from the average of the 3 cooler months of December to February. This is why some people saw their kwh consumption increase by 200 to 400%

5. Where did the additional power, that we the residential customers consumed, come from? 

Those were the power that Meralco used to supply to the large industrial customers and at the rate of P0.82 per kwh for distribution. Now, they supplied it to us residential customers at the rate of P2.98 per kwh.  Suddenly, the industrial power that Meralco normally sell for P574 million, is now being billed at P2.086 Billion or a gravy revenue profit of P1.512 Billion per month. For the 2-1/2 months from mid-March to May their windfall profit P3.78 Billion.

6. Why is this wrong?

That was what we were hoping to present to the House Committee on Energy and to ERC.  Allowing Meralco to bill these industrial power with a regulatory rate of P0.82 per kwh at the normal residential rate of P2.98 per kwh would result to an over-recovery of P1.512 Billion a month and would violate the approved total “Annual Revenue Requirement” as approved by ERC, that is designed to keep the regulated company within “fair and reasonable” return on equity limits.

Because of the altered normal energy consumption of each consumer group during the Covid-9 ECQ and GCQ months, ERC’s MAP or Maximum Average Price that was used in computing the per kwh rate for each customer group is made invalid. Again, as ERC Chair Devanadera recognized, “the situation was not envisioned when the rules were established”

7. From what I can recall, it was only Energy Committee Vice-Chair Presley De Jesus who picked up on the importance of this new information and asked in his comments that the disparity in rate as raised by MSK should be discussed further.

8. No one had a chance to ask MSK for further explanation.

9. About 2 hours later, Meralco was ready to address the consumer groups issues including MSK’s revelation. Meralco’s response was classic Meralco deflection, hoodwinking, and denial. And they are evidently pro’s at these. If they say it enough and deny it enough with straight faces, it will eventually be accepted as true. You would to do it if billions in additional opportunity revenues are on the line.

10. Top Meralco regulatory lawyer Atty. Ronald Valles, said MSK’s allegation is wrong. He said Meralco has no “Maximum Approved Revenue” or MAR as pointed out by MSK. They have the kwh rates as approved by the ERC. OK Atty. Valles it is not MAR, in Meralco’s case it is called ARR or annual revenue requirement. And a MAP or maximum average price that is used to translate your annual revenue into kwh rates for each consumer group.

11. Atty. Valles further said that, if I understand right what he said, was that it is not true that our claim that the industrial energy that was supposed to be consumed by industrial customers at P0.82 per kwh was instead consumed by residential customers. He said MSK is wrong.

12. Ok. Here is what we know. Meralco power purchases based on its own records were 2.597 Billion kwh in March, 2.558 Billion kwh in April, and in May it was 2.541 Billion.

In the normal months of January and February it was 2.637 and 2.592 billion respectively. 

13. No one of course will believe that the power consumption of Meralco’s large industrial customers did not drop significantly during the lockdown period when they are supposed to be closed. In any case, if such P0.82 per kwh power was not supplied to the residential customers, the 50 to 200% increase of the consumption of these residents would have come from additional power supply and Meralco’s power purchases would have risen to more than 3.541 billion in May not 2.541 billion.

14. It should be explained that when Meralco buys power from its various generators, they don’t distinguish purchases by consumer group. Meaning, they don’t say, this power goes to low income and lifeline customers, the expensive QPL power goes to the middle residential and commercial customers who we charge higher, and etc. All those power flow into one distribution grid and the consumer classification only defends on who consumed it.

15. Now, In Meralco’s Maximum Average Price as approved by the ERC under PBR rate setting methodology, kwh sales to each group was presumed. For purposes of this discussion let us say, the small residential and lifeline customers numbering about 3 million consume only 20% of Meralco energy sales. The regular residential and commercial group (including offices and condos) consume about 40% and the large industrial consumers using the balance of 40%. Suppose Meralco bought 2.5 billion worth of power, it means normally 500 million kwh will be consumed by small consumers, 1 billion by the regular residential and commercial, and 1 billion by the large industrial customers.

16. Under the ERC approved ARR AND MAP rate translation, the 500 million will be charged at 1.88 per kwh, the 1 billion to residential and commercial shall be charged at P2.98 per kwh, and the 1 billion kwh for the industrial customers will be charged at P0.82 per kwh. If the sales of Meralco stays as normal and Meralco is using accurate numbers, then the resulting total revenue should be about the level of the ARR or annual revenue requirement. If they exceed this total, it means they are “over recovering” and must be ordered to refund. Or to reduce their rate in the next regulatory reset period.

17. This is the main point we are making and actually the solution to the search for solid and legal ways to reduce the burden to the quarantined Meralco consumers under ECQ and GCQ. Meralco will not do it on its own. Meralco should be ordered by the ERC to charge the excess consumption of the residential consumers during the Covid-19 lockdown periods at the rate of only P0.82 per kwh instead of P2.98 per kwh. 

18. MSK’s numbers are calculations and will not be exact as Meralco might claim. However, the principle and conclusion would be valid. Allowing Meralco to charge the normal P2.98 per kwh for power that should have been sold at P0.82 to industrial customers would result to an over-recovery that will run to at least P1.5 billion month, an overcharge that the suffering Meralco consumers can not afford.

These are the right questions that need to be asked, not to Meralco, but to the ERC which has the mandate under the law to protect the public interest and to assure that it’s approved ARR or annual revenue requirement limit are observed. 

This is a good time for those who have mandates to protect the public interest to step up for the public really need protection in these days when they are suffering and vulnerable.

Turning our backs on them would be morally insensitive. 

We appeal to Senate and House Committees on Energy to take cognizance of this imminent over recovery and violation of ERC’s approve revenue limit for Meralco and help us get heard by ERC. If nothing else, to be moved by the concerns of their constituents. 

Let us not allow the regulatory system to fail again our people as what happened in December 2013 when the ERC approved a one month jump of P4.15 per kwh in generation rates “because it is according to the rules”. In that time, it took the sensitive Supreme Court to intervene to protect the public interest. 

Let us address the right issues and ask the right questions. ERC is the right venue. For now.

God Bless and Keep safe everyone.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph