Freedom from Debt Coalition members protest outside Energy Regulatory Commission against high electricity ratesMANILA, Philippines – Members of the Freedom from Debt Coalition and officials of the Energy Regulatory Commission met Friday in a “face-off” to discuss ways to reduce the skyrocketing rates of electricity and to empower consumers in the country.

However, the regulatory body allowed only six representatives from the advocacy group to participate in the dialogue held at the former’s office in Ortigas Center, prompting around 80 leaders of various community-based organizations to stage a picket protest outside the venue.

FDC is a national coalition of more than 200 non-government and people’s organizations advocating people-centered economic development. For 10 years, FDC had been advocating against the privatization of the power industry, and has been pushing for stronger industry regulation and campaigning against high electricity rates.

Milo Tanchuling, FDC secretary-general, said that they sought feedback from ERC Commissioners on the seven-page proposed measures, titled “Declaration of Unities and Action Points,” to address problems besetting the electric power industry which the Coalition submitted to the regulatory body weeks ago. The declaration was an output of the FDC-sponsored “National Power Summit” held last June 25-26 in Quezon City. It contains a long list of proposals on topics such as renewable energy; debts of the National Power Corporation; how to reduce power rates; making power industry more efficient, reliable and secure; regulation; and, women under power privatization and regime of Electric Power Industry Reform Act of 2001 (EPIRA).

Tanchuling said that FDC focused on four major points that would lower electricity rates and empower the consumers during the dialogue.

Indexation to international price

“We urged the ERC Commissioners to stop the indexation of or pegging the prices of natural gas and geothermal steam to the international prices of oil and coal, respectively. This indexation makes the prices of electricity generated using natural gas and geothermal steam become higher, not to mention becoming vulnerable to price fluctuations in the world market for oil and coal” said Tanchuling.

PBR methodology

FDC also urged ERC to stop the incorrect implementation of ERC’s performance-based rate (PBR) methodology. The ERC’s PBR method allows power firms to increase rates in anticipation of future expansion and other capital expenditures.

“We believe that the ERC’s version of PBR methodology is unfair and unjust to consumers. Instead of increasing the efficiency and lowering the tariffs that commonly followed the implementation of PBR in other countries; those of local distribution and transmission utilities have been increasing at an average of 63 percent and 40 percent, respectively, in the Meralco franchise area,” said Tanchuling.

According to FDC, the fatal flaws of the ERC PBR include:
a. failure to determine and benchmark the utilities’ cost to the cost of an efficient utility;
b. absence of real efficiency targets; and,
c. absence of real performance standards.  

“If ERC cannot implement PBR correctly, then it would be better to revert to the much simpler Return on Rate base (RORB) methodology,” Tanchuling said.

‘Acting like a regular court’

FDC also urged ERC to change its tedious and highly legalistic framework in the conduct of regulation.

Citing the study of Maria Fe Villamejor-Mendoza on the regulation of electricity in the Philippines, FDC said that the rules of the ERC in responding to the different issues of the power industry are very legalistic, “in the sense that they are patterned after those of the courts."

"Consequently, the workings of the industry regulator have required hearings on the complain or petitions, receiving evidence from opposing parties, deciding between the companies and the public as assumed litigants, and then issuing decisions or resolutions based on the technical records made in the course of the hearings,” according to the study.

“Under this quasi-judicial setting, public interest is subjected to litigation and treated more as a legal question instead of direct regulation. Substantive concerns, such as morality of rate increases and the like are assessed using rule-based ‘factual’ analysis rather than policy, management or governance approaches,” the study said.

"ERC should stop acting like a regular court. It should be flexible in its treatment to consumers who want to participate in the deliberations of the commission,” said Tanchuling.

Consumer education

Aside from its traditional rate and service regulation functions, one of the two primary responsibilities of ERC is to ensure consumer education and protection. The other responsibility is to promote the competitive operations in the electricity market.

“With the skyrocketing cost of electricity in the country and 40 percent of households still dreaming of having access to electricity, there is no doubt that ERC has failed tremendously in educating and protecting the consumers. Sadly, we had to remind ERC of its primary task of ensuring consumer education and protection,” Tanchuling lamented.

Recently, FDC has announced that it will hold a national protest, dubbed “Power-Off,” which urges electricity consumers to switch their lights off and hold noise barrage on October 11, between 7:30 and 8:00 in the evening, to dramatize their opposition on high power rates, privatization of remaining power plants and EPIRA. (30)

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