03 February 2006
The Freedom from Debt Coalition (FDC) lauded the Supreme Court today for deciding in favor of the public’s interest when it voided the 13.27-centavo rates increase of Meralco in June 2004.
“The Supreme Court decision is another victory for the consumers. Its decision only validated our earlier claims that Lopez-controlled Meralco has a habit of taking advantage of the consumers through its bad corporate practices and ERC commits grave abuse of discretion in deciding on the utilities’ applications.”
The 13.27-centavo rates increase was based on the decision of the Energy Regulatory Commission on Meralco’s recovery of its generation costs through the generation rate adjustment mechanism following the Commission’s March 2003 order on the unbundling of rates application of Meralco.
“It’s saddening that the ERC, that’s supposed to protect the public interest, committed lapses in performing its functions. It violated its own implementing guidelines that rates applications need to be published to notify the public. Another abuse of discretion it committed was when it allowed Meralco’s 12-centavo provisional rates increase in November 2003 even when it had not issued an order yet on the request for production of documents by the Freedom from Debt Coalition, one of the oppositors to Meralco’s application.”
“These intolerable lapses by ERC warrant an overhaul of the Commission and we also see it as a reflection of conspiracy and fraud committed at the highest office in the land as in the case of Gloria Arroyo whom the people demand to step down.”
“Likewise, these cases of fraud committed by Meralco, all the more, embolden our resolve to break the Lopezes’ control in these utilities. With these malpractices, it is just right for the consumers to takeover these utilities.”
The history of cases below shows a clear pattern of fraud in the form of overcharging and other corporate malpractices committed by the Lopez-owned utilities against the consumers.
LOPEZ-OWNED/CONTROLLED DISTRIBUTION UTILITIES’ PATTERN OF OVERCHARCING/COLLECTION FROM THE CONSUMERS
1) Manila Electric Company (MERALCO) - Metro Manila, Bulacan, Laguna, Cavite, some parts in Batangas and Quezon
a. 1994 - P0.017/kwh overcollection from 1994 to 2002 through inclusion of its income tax in the computation of its RORB. Meralco continued to collect such amount until Supreme Court finally decided on the case in 2003.
More than P30 billion should be refunded to the consumers beginning 2003 as the Supreme Court upheld earlier Court of Appeals ruling voiding the P0.017/kwh overcharging. Until now, the refund has not yet been completed.
b. 2002 - P0.50/kwh over/(under) recoveries in its computation of Purchased Power Adjustments (PPA). ERC issued a cease and desist order on the collection of said amount.
ERC found out that Meralco erred in its computation of its under recoveries allegedly amounting P12,340,268,730.50 as of December 2001.
c. November 2003 - P0.12/kwh provisional rates increase granted by ERC in November for the P0.13/kwh rates increase application of Meralco. The provisional increase took effect in January 2004.
In January 2004, Supreme Court issued a TRO on the collection of said provisional rates increase, upon the intervention of the Freedom from Debt Coalition (FDC) and other groups. In June of 2004, SC voided Meralco’s collection of such provisional increase.
d. June 2004 - P0.1327/kwh increase due to Meralco’s recovery of purchased power costs from its independent power producers through the Generation Rate Adjustment Mechanism (GRAM) following the decision of ERC in Meralco’s unbundling of rates application that the collection of purchased power adjustment (PPA) be discontinued. The utilities are still allowed to recover its purchased power and fuel costs arising from contracts with the IPPs through GRAM.
Some groups questioned ERC’s decision at the Supreme Court. On 02 February 2006, SC voided such ERC’s decision.
2) Panay Electric Company (PECO) – Iloilo City
2004 – P2/kwh reduction in PECO’s generation rate was ordered by ERC on May 2004 through FDC - Iloilo’s intervention. FDC-stressed stressed that the first ERC decision exposed PECO’s malpractices in rate-making by inserting some their assets in rate base like their property in Benigno Aquino Highway with an appraised value at P51-million.
PECO brought the case to the Court of Appeals. On 25 April 2005, CA issued a TRO on the implementation of ERC’s order. Final CA decision on September 2005 upheld ERC’s decision. PECO has reduced its rates, but has yet to refund some P1.5 billion for its continued collection of P2/kwh from May 2004 to May 2005.