The Ugly Picture of Meralco’s Violations of Consumer Rights

David Celestra Tan, MSK

31 October 2016

Your organization Matuwid na Singil sa Kuryente Consumer Alliance Inc had been formed to fight for consumer rights in the Meralco area, more particularly abusive power rates.

Our first action was in 2011 when MSK opposed the construction of an P11.9 billion submarine cable system to connect the island of Mindoro to Luzon whose cost will be passed on to the Luzon consumers. It was close to quiet approval by the ERC until MSK asked simple questions and the applicants cannot justify it including the claim that Luzon will benefit from a 300mw coal plant in Mindoro where there are no coal mines. The expensive overhead transmission line will go all the way to San Jose Mindoro Occidental. It turned out the project was actually to enable a coal company to build a power plant on his island and only needed a shorter submarine cable line to nearby San Jose Mindoro go tap the main power market of Luzon. Very imaginative at the expense of the consumers. That project was shelved I think saving the the national electric consumers P0.04 per kwh in unnecessary transmission charges. That supposed 300mw from Mindoro is now being sourced from Luzon based generators without the need for building an P11.9 billion transmission line.

It has been a lonely fight for consumers. As a consumer advocacy group, one thing that has been surprising to MSK is the seeming apathetic attitude of government officials, the media, and the consumers themselves to consumer rights and its abuse and violations.

In our previous posting of the guest article of former Secretary Cielito F. Habito on consumer rights he asked questions that are very relevant to the Meralco consumers.

“How can companies providing various goods and services that are part of our daily lives keep getting away with practices amounting to abuse and exploitation of their consumers—the very people that keep their firms alive? Why is it so hard for exploited consumers to band together, organize and collectively assert their rights to get what is due them, or at least what is promised them by the companies they patronize?” 

Meralco consumers are probably taking a double take when consumer abuses by the distribution utility monopoly is raised. For Meralco consumers are inundated by ads and testimonials from businesses that have benefited from Meralco’s various energy saving programs. Let grant that those good deeds are true. That is not where the consumer rights are being violated. It is the rights of its captive consumers who are 40% of their customer base but provide them with 60% of their profits. They are treating them like captives.

Let us start with defining the rights of Meralco’s consumers or more accurately Meralco’s obligations to its customers.

Violation of Consumer Rights under EPIRA Law or RA 9136.

1. Abuse in Generation Rates

Meralco is required by the Epira Law of 2001 under its Section 23 “to supply electricity in the least cost manner to its captive consumers”. That is not only on generation but also on their distribution charges.

The MVP Groups continued refusal to subject to true competition the power generation supply and charges that are passed on to the consumers is a blatant denial of the fundamental Consumer Right to “least cost” power. Worse to insist on negotiating them with their own sister generators. MSK submits that the only way to assure that it is least cost is to truly market test them in an honest competitive bidding for those contracts. Not “least cost” as self-servingly defined by the MVP Group and not as it incredulously claim to have “aggressively negotiated” with their majority owned generating companies under Meralco PowerGen.

Meralco is ramming through the ERC and Congressional JCPC the seven (7) midnight contracts totaling 3,551mw that would deny consumers competitive power for 20 years. We estimate the sweetheart overprice would amount to at least P0.50 per kwh or P12.5 billion a year.

This is more arbitrary exaction than government taxes which at least have foundations in law, go through rigorous legislative process and scrutiny, and the money, at least for the most part, goes to the people in running government and public services. Columnist and author Rigoberto Tiglao asserts with seeming irrefutable trail, that the Profits that Meralco proudly announces ironically go out of the country to Indonesian owners. For MSK, overcharges and violations are illegal and should not be allowed whether by Filipino or foreign owners.

2. Abuse in Distribution Rates

The Epira Law also requires Meralco as the distribution utility to charge fair and reasonable rates. Its use of PBR is exploitive. Its systems loss charging system is non-transparent and deceptive. They present a systems loss charge of 6% on the bill but if you compute in the back, the system charge is actually 10%, higher than the 8.5% supposed limit.

Section 43(f) of the Epira Law required distribution utilities like Meralco to adopt rate setting methodologies that are “in the public interest”. Section 25 says its returns must be based on investments “incurred”. Under PBR it is charging for projected investments not yet incurred. PBR as currently used by ERC and Meralco is contrary to law.

The recent discovery by MSK that Meralco is allowed by the ERC to keep excess profits coming from growth in energy sales over the “projected” sales shows the length and depth of rate abuse (and collusion?). Yes, 7% actual growth as announced by Meralco itself vs projections of 3.7%. Isn’t that obviously an 89% excess? In fact Meralco just announced a 9% growth in energy sales.

MSK actually had filed a petition to the ERC to order Meralco to account for the excess for the period 2011 to 2015 and refund the estimated P2.9 to P5 Billion in overrecovery. (This anomalous methodology was inherited by the new ERC Commissioners. The question is will they do something about it now to correct the sham and abuse?)

Consumer Smugness

Ironically, Meralco consumers do not show concern now, and consequently government officials don’t see a need to act, because the generation rates are temporarily low due to the lucky drop in the world old prices. And helped by a carefully crafted Meralco PR campaign to condition peoples’ minds. The increase in the ability to pay of Filipinos from the BPO and Overseas Employment and the prosperity from the rise of the property values of the lucky landed gentry, make them unconcerned about their electric bill. One day though we will all wake up when the devil of all these self-negotiated contracts will come and haunt all of us consumers and all we can do is cry. The MVP Group then will take cover and claim their constitutional right to “sanctity of contracts”.

This is like the drug problem that had been neglected for so long until it became a national epidemic.

MSK is trying to raise the alarm bells now.

Part of the eerie apathy comes from the cynicism of government officials and consumers themselves on the genuinness of the consumer groups’ agenda. For it is true that many consumer advocacy groups have come and gone, some clearly formed to only project a support for Meralco’s on going agenda and to disappear afterwards. These pseudo consumer groups are normally led by lawyers. One went as far as filing a case in the Supreme Court against Renewable Energy.

3. Government missing in action

There are any number of government agencies who can step up to defend the consumers from abuses specially in electricity. Yet most of them are quiet. The Department of Energy and the Energy Regulatory Commission whose jobs it is to provide policy and enforce regulations to protect the public interest. The JCPC of Congress whose job it is to oversee the implementation of the Epira to assure they are complying with the law, one of which is the protection of public interest. There is the Bureau of Consumer Affairs at the Department of Trade whose job it is to protect consumers under the Consumer Act. The Energy Committees of the lower and upper chamber of the legislature, their Chairmen and almost one hundred committee members, who at least should look into these abuses. The Executive Department whose job it is to look after the general welfare of consumers as taxpayers and voters, and to promote national economic competitiveness. One hopeful sign is the Philippine Competition Commission whose job it is to enforce the rules of the Competition Act and prevent abuses by businesses.

Open violation of consumer rights by Meralco has been ugly. Your organization MSK will continue its fight for regulatory reform. Maybe some of you can give a hand and let your own legislators and regulators know your concerns. Write President Digong. It is only through our collective voices that we consumers can be heard!

Evil triumphs only if good men do nothing. Otherwise it becomes ugly for us consumers.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

Matuwid.org