The Freedom from Debt Coalition (FDC) warns that another case of corporate abuse and impunity by MERALCO is about to be committed at the expense of the long-suffering electricity consumers with the power company’s recent application with the Energy Regulatory Commission (ERC) of the so-called “interim rates” in order to remedy the company’s failure to reset its power rates and charges, as required by the ERC rules, every four years.

FDC asserts that the interim rates applied for by MERALCO in ERC Case No. 2015-112RC and its capital expense program proposed in ERC Case No. 2015-016RC are illegal, highly irregular, alarming and anomalous.

MERALCO’s interim rate application effectively undercuts and sidesteps the need and process for the Rate Reset—an adversarial process that theoretically requires the ERC to review and approve, every four years, MERALCO’s Distribution, Supply and Metering (DSM) charge, under ERC’s own rules for Performance Based Regulation (PBR).

MERALCO is trying to remedy this failure , with this interim rate application, thereby violating ERC rules, as well. If it will give due course to the interim rate application of MERALCO, ERC will therefore be complicit in the violation of its rules, and to many consumers, to another exercise of corporate abuse and profiteering by the giant power company.

FDC asserts that perhaps the biggest reason why MERALCO appears hell-bent in riding roughshod over ERC’s rate reset requirement and which the company fails to mention is that the DSM constitutes the core revenue or income of MERALCO—in fact, the sole driver of the company’s close to P20B annual net earnings.

This huge profit-making mechanism is distinguished and apart from the generation and transmission charges, taxes, subsidies and system loss which are pass-thru costs, a point often belabored by MERALCO.

Under PBR rules already skewed by ERC to favor utilities like MERALCO, consumers or MERALCO’s captive customers are theoretically given the chance to scrutinize and even contest certain MERALCO’s charges under PBR, which they may find abusive and unjust such as:

  • The Regulatory Liaison and Compliance Fund. MERALCO applied for P2.16B, got approval and collected P2.2B. This is a fund to pay consultants for ERC but ERC cannot produce the contracts, which therefore compel MERALCO to make a P2.2B refund.
  • Under recovery: P20B applied, P24B approved and collected, yet no details are given.
  • The Capital Expense or Capex is P37B, based on projected market growth, without subjecting to public scrutiny any proof of compliance with the capex programs, proof of purchase, physical inventory and documents on the regularity, let alone, the justness of this provision.
  • Approval of the 3rd RP MAP (Maximum Average Price) which has two major annexes -- the Operational Expense or OPEX and the Capital Expense or CAPEX. Consumers should scrutinize these items line by line and require MERALCO to prove each item or refund the charges.

This rate resetting exercise and mechanism, may enable abused consumers to lodge complaints such as against excessive charges by MERALCO and demand remedy, or help expose further the extent to which corporate abuse and impunity by power giants like MERALCO will have been allowed, if not facilitated by ERC and its rules, and by EPIRA in general.

As of July 1, 2015, MERALCO lost all legal bases to impose its DSM charges for failure to reset its rates prior to the lapse of the 3rd Regulatory Period. Consumers, on the other hand, lost the only opportunity to hold MERALCO accountable for its 3rd RP excesses because there was no reset.

If ERC gives due course to the twin applications of MERALCO and puts off the rate reset indefinitely, consumers will be denied the right to exercise their role in the rate setting process, while already being deprived the right in the annual rate translation proceedings because of the lopsided ERC rules.

FDC also calls for an exhaustive and thorough review of all prior DSM charges of MERALCO under PBR. In fact, the transition from the combined 1st & 2nd RP to the 3rd RP did not have the review and audit petitioned by consumers. Excessive collections by MERALCO should be investigated, liabilities of the company should be exacted and a refund to the consumers should be done. Meanwhile, MERALCO should not be allowed to charge higher than P0.97 pkwh DSM rates prior to PBR.

FDC challenges the ERC to respond to MERALCO’s allegations over its failure to issue on time the rules governing the power company’s reset application for the current (4th) Regulatory Period. MERALCO claims in its Capex application filed February 9, 2015 that it “is still to undergo the reset process and is awaiting the release by the Honorable (Energy Regulatory) Commission of the final rules to govern the filing of its (MERALCO’s) 4RP (4th Regulatory Period) reset application”

Whether ERC’s failure to issue the governing rules according to PBR timeline is deliberate or through sheer neglect and incompetence—has no excuse at all. Worse, the ERC gave MERALCO an alibi to justify its acts of undercutting and ignoring ERC’s own rules on the rate reset process. The ERC Issues Paper for the 4th RP was put out sometime in October, 2013, and the 3rd RP had a 4-year run; therefore, ERC cannot plead lack of material time for preparation.

FDC calls on the people to unite and oppose these latest moves by the MERALCO to impose its will on the consumers and thwart its further profiteering and corporate abuse. We call on the affected and concerned consumers and the public to make existing power utilities accountable, and in the long-run, to fight for the thorough transformation of our energy system towards an affordable, accessible, safe and sustainable one for and by the people. A decisive break from an abusive and profiteering monopolies, a reversal of the privatization policy and a return to public control of our power industry and a replacement of EPIRA by a pro-people and pro-development power and energy policy—are immediate and important steps that we need to fight for and realize in the near future.

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