QUEZON CITY - Electricity consumers led by the Freedom from Debt Coalition (FDC) and labor partylist group Partido ng Manggagawa (PM) proceeded with their planned mass action in front of a Meralco branch here Thursday against power rate hikes despite the distribution utility’s announcement that it is cutting its generation cost by P1.26 per kWh beginning this month.

“Meralco’s announcement may have been prepared to diffuse the rapid buildup of protest against its unjust rates,” said PM spokesman Wilson Fortaleza, referring to the growing outbursts against power rate hikes that now even reaches the cyberspace prior to the announcement.

Fortaleza said that despite the announced rate cut, more mass protests should be launched against Meralco and other utilities in the face of the failed regulatory functions by the government and the power firms’ “insatiable greed for profit.”

“Meralco is a regulated utility.  But when regulation fails to protect consumers from corporate greed and repeated abuse, street protests become the necessary option for the hapless consumers,” explained Fortaleza.

Meralco’s rate surged to the highest level this month due to tight supply and the hikes in the price of electricity traded at the Wholesale Electricity Spot Market (WESM).  According to Meralco, its independent power producers (IPPs) which provide more than half of Meralco’s requirements were forced to shut down their operations last month due to routine maintenance at the Malampaya gas field, forcing them to source power at WESM but for more than what is required of them.  EPIRA requires a utility to purchase at least 10 percent of its energy requirements from WESM.

Also under EPIRA, Meralco has the obligation to deliver power to its customers at the least cost manner.

“Yet, Meralco always has this predilection of passing the burden of its erroneous practices to its captive clients by way of over-charging and through other forms of corporate fraud,” protested  Fortaleza.

He insisted that instead of a price hike, Meralco rather owe the consumers refundable amounts in over-charging as found in the 2009 COA Audit. The COA audit revealed that Meralco has over billed its customers by at least P15-B from 2003 onwards.

Return on rate base

For its part, FDC said that Meralco has been taking advantage of the flawed Electric Power Industry Reform Act or EPIRA.

Job Bordamonte, FDC advocacy coordinator, said that EPIRA allowed the Energy Regulatory Commission (ERC) to change the system of tariff setting, adding that the so-called Performance Based Regulation (PBR) has provided the private distribution utilities, such as Meralco, to advance rates increases as long as ERC approved their respective business plans.

“Meralco’s electricity price increases astronomically because the ERC now replaces the statutory return on rate base (RORB) cap of 12 percent with the PBR which has no cap whatsoever other than the 5 year annual review mechanism,” he said.

Because of this, FDC urged Meralco to earn profit not more than the allowed rate.       

FDC also cited another way on how Meralco has benefited from the said law.

“EPIRA legitimizes the onerous provision of take-or-pay guarantees (fuel and exchange rate guarantees) among the independent power producers (IPPs) including Meralco-owned IPPs. This is translated to Meralco’s cost-recovery mechanism under the Automatic Generation Rate Adjustment (AGRA),” FDC said.


FDC also stressed that Meralco’s cross-ownership of generation and distribution companies has contributed to the continuing electricity price hike.

“There is a clear conflict of interest with regard to Meralco’s purchase of power. EPIRA allowed Meralco to get most of its electricity requirements from its sister companies or IPPs – Santa Rita, San Lorenzo Natural Gas and Quezon Coal-fired Power Plants,” Bordamonte said.

Although Meralco does not earn from the charges given by its sister companies, the owners (Lopezes) of the generation and distribution utilities do.

Moreover, Meralco could have obtained a cheaper price of electricity had it bought from the National Power Corporation (NPC) since the cost of power from Lopez-owned IPPs is higher than that of NPC’s.

Because of the cross-ownership issue, FDC said that the Meralco has to choose whether it wants to continue as a generation or a distribution business.

“Now who is afraid of people power?  Power rate hikes, power crisis, and a failing electoral exercise could be a perfect combination for another one,” concluded Fortaleza. (30)

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