Consumer groups ask ERC to scrap rate-setting method on Meralco

MTRCB, ERC sign MOU on consumer education

The United Filipino Consumers & Commuters (UFCC) and Freedom from Debt Coalition (FDC) seek immediate disposal of the Energy Regulatory Commission’s (ERC) rate-setting methodology for a more consumer-centric billing costs.

Consumer groups called on the energy regulator to adopt a low rate-friendly methodology, such as a modified Return on Rate Base (RORB) setting.

The energy regulator has employed the Performance Based Regulation (PBR) in determining the distribution and transmission rates as well as capital expenditures of private transmission and distribution utilities.

According to a position paper sent to the ERC, Meralco doubled its distribution cost under the PBR compared to its 700 percent boost in earnings with the RORB method.

In detail, Meralco’s distribution, supply, and metering (DSM) charge under RORB was P0.79 per kilowatt-hour (kWh), which increased to P1.64 per kWh under PBR.

Meralco’s earnings, on the other hand, also saw a huge leap from P2.7 billion to P19 billion over the same period.

Romeo Junia, UFCC and FDC’s representative during a public consultation, said that the PBR was conceived as an alternative to RORB in 2002 to 2003, the same period the Supreme Court (SC) ordered Manila Electric Co.’s (Meralco) refund worth P32 billion.

The SC capped the power retail’s earnings at 12 percent and excluded its corporate income tax from chargeable or recoverable expenses.

Meralco’s corporate income tax, SC cited, was disallowed because it benefited its shareholders and investors, not the consumers. Whoever enjoys the income should pay the tax on it, the Court said.

This court rule gave leeway for PBR, wherein the income tax serves as building block authorized by the ERC.

The consumers argued that it is ironic that ERC thru PBR wiped out their gains from the landmark decision of Justice Reynato Puno that raised the people’s right to electricity and to be reasonable charged for it to the level of fundamental economic and political rights the State must protect.

“While utilities are entitled to ‘the recovery of just and reasonable costs and a reasonable return… to enable it to operate viably’ ERC must also ensure a reasonable price of electricity to the consumers,” Junia said.

Under RORB, recovery costs are based on historical and actual investments or expenses, whereas a Maximum Average Price (MAP) is set by the ERC every four years for PRB.

MAP is based on forecasted energy sales and projected expenses and investments that until today, after almost six years, have not been audited or verified.

When ERC applies return on equity instead of capital or asset base, Meralco’s rates can go down by about P0.15 per kWh, Junia said.

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