SC told to rethink decision to allow power rate hike

BY JOEL R. SAN JUAN – JULY 20, 2022
from Business Mirror

Several party-list groups are asking the Supreme Court (SC) to reconsider its recent ruling which affirmed the validity of the decision of the Energy Regulatory Commission (ERC) allowing Manila Electric Co.’s (Meralco) request for a staggered collection of automatic rate adjustments.

In a 37-page motion for reconsideration, the petitioners insisted that the ERC order granting Meralco’s request dated December 5, 2013 was not for the interest and protection of consumers as what the Court held in its  decision made public last July 1, 2022. The company had requested for rate adjustments arising from generation costs for November 2013.

The Court ruled that the ERC’s decision to allow the staggered recovery of the adjustment charges while denying the request of Meralco for carrying costs was intended “to protect the interest of the consumers” by not compelling them the adjustment rates in one bill.  “The Majority did not see anything wrong with how the ERC exercised (or failed to exercise) its powers,” the petitioners said.

“But how about the consumers who will be forced to shoulder the rate hike, which is the highest recorded pass-on charge in Philippine history, and which atrocious amount was a result of anti-competitive behavior, ineptness, and irregularities? What about the State policy of consumer protection and regulation of monopolies for the public good? From where we sit, the consumers do not feel that its interests are being protected and promoted,” they added.

The petitioners include representatives from party-list groups such as Bayan Muna, Gabriela Women’s Party, ACT Teachers Party-list and Kabataan Party-list, National Association of Electricity Consumers for Reforms, Federation of VillaGe Associations and Federation of Las Piñas Homeowners Association.

In a letter dated December 5, 2013, Meralco informed respondent ERC that the total cost of generation to be passed on to its almost 5 million captive customers amounted to P22.64 billion. The figure is equivalent to a generation charge for the December 2013 billing of P9.1070 per kwh, which is an increase of P3.44 per kwh from the P5.67 per kwh that was billed in the previous month.

This will result in an increase of P4.15 per kWh for residential customers, according to the power firm.

The petitioners said the increase was one of the highest rates, if not the highest, in the history of the country.

The petitioners noted that the ERC approved the staggered increase in just a span of one working day.

It added that the ERC failed to investigate first the generation rate despite supposed irregularities prior to its approval of Meralco’s request.

Due to ERC’s “hasty approval” of Meralco’s request, the petitioners said consumers were deprived of the opportunity to comment or oppose the rate hike.

“ERC utterly failed in its duty to promote the interest of the consumers. Its actions point to dereliction of duty in the face of the blatantly irregular Meralco letter. This dereliction of duty greatly prejudiced the public good and destroyed the trust and respect of the people in our regulators and institutions,” they said.

Shutdown of plants

Meralco attributed the abrupt increase in the generation cost to the supposed maintenance shutdown of the Malampaya facility that supplies natural gas to three major power plants—Ilijan, San Lorenzo and Sta Rita—which supply an aggregate capacity of 2700 MW electricity to its franchise area.

It also said that the shutdown of Malampaya coincided with the scheduled maintenance of two other plants, Pagbilao 2 and Sual 1, which also collectively contribute over 950 MW to its requirements.

Meralco said because of the events, it was forced to buy expensive power from the Wholesale Electricity Spot Market (WESM).

Subsequently, the ERC issued an order on March 3, 2014 that regulated WESM prices for the supply months of November and December 2013 to ensure competitive market environment among power generation companies (gencos) and to safeguard the interest of the consuming public.

The ERC said its order was consistent with its mandate under the Electric Power Industry Reform Act of 2001 (EPIRA), to protect public interest as it is affected by the rates of electric utilities. The agency said it also wanted to ensure transparent and reasonable prices of electricity by not allowing excessive and unreasonable prices of electricity during the period of Malampaya shutdown.

The ERC was then investigating the alleged collusion among gencos to manipulate prices of electricity in the spot market during the shutdown of the Malampaya gas facility in 2013.

However, the said ERC order was struck down by the Court in the same decision issued last July 1.

It held that the order was issued by the ERC even if it was still in the process of completing its findings on the possible abuse of market power which could have negatively impacted on the prices of electricity in the market.

The Court noted that the ERC also did not notify the affected parties about its investigation, in violation of their right to due process.

The petitioners believed that true competition that should lower power will never prosper considering that the generation sector “is virtually an oligopoly.”

“Oligopolists can maximize their profits by forming a cartel and acting like a monopolist. The greater the number of firms in the oligopoly, the closer the quantity and price will be to the levels that would prevail under perfect competition,” they noted.

The generation sector, according to the petitioners, can be considered an “oligopoly” since 80 percent of power capacity in the country is under the control of five companies such as Cojuangco/SMC (22 percent), Aboitiz (20 percent), Lopez (18 percent), Ty (12 percent), and Consunji (8 percent).    “The facts of this case—which would show prima facie evidence of price manipulation in the sport market, collusion and in general, anti-competitive behavior on the part of the generating companies, as well as Meralco—clearly illustrate how the few were unable to influence the power cost or price under a deregulated structure,” the petitioners said.