Meralco unstoppable, ERC infallible

CROSSINGS
Butch Junia
7/18-24/2011



The Energy Regulatory Commission (ERC) last month granted or approved Meralco’s Maximum Average Price (MAP) of P1.5828 per kilowatt hour for distribution, supply and metering (DSM) charges, to take effect July 2011.

Meralco’s DSM rate today is P1.6464 pkwh, granted by ERC for Regulatory Year (RY) 2011 (June 2010-July 2011).

It is a rate that consumers led by Mang Naro Lualhati say should only be P0.90 pkwh.

Meralco’s application in June 2010, approved exactly a year later, was for a rate increase to P1.7056 pkwh for RY 2012. This was ERC Case No. 2010-069RC.

Still, consumers led by Mang Naro say that rate should only be P0.90 pkwh.

P20-B Overcharge
When ERC announced last month its order granting Meralco’s latest overstated rate, ERC made much of the point that the rate they approved at P1.5828 pkwh was lower than the current rate of P1.6464 pkwh.

Mang Naro was not impressed – P1.5828 pkwh is still P0.6828 pkwh over the true rate, which he said was P0.90 pkwh. With Meralco’s annual sales of 30 Billion kwh, that would be an overcharge of over P20 Billion.

The ERC’s latest rate award to Meralco is also being challenged by other consumers like Pete Ilagan of the National Association of Electricity Consumers for Reforms or Nasecore.

They insist that ERC’s approval of Meralco’s Annual Revenue Requirement (ARR) was hasty, irregular, arbitrary and contrary to law and jurisprudence.

The ARR is the projected expense budget of Meralco that is now the basis for the rate that Meralco will charge us for the next four years, from July 2011 to June 2015.

ERC on Other Side
Last June 28, Meralco filed its application for approval of its MAP for RY 2012 and the translation of that MAP into a distribution rate structure for its various customer classes. This was docketed as ERC Case No. 2011-088RC, a new case.

As expected this drew loud protests from those who insist that there are many unresolved issues in the ARR application, ERC Case No. 2010-069RC.

Arguments and objections ranged from the legal, technical, policy, mathematical, etc.

Being familiar with the issues, I know the oppositors have the law, jurisprudence, logic, equity, fairness on their side.

Unfortunately, ERC is on the other side.

Reviewing the whole process that has been laid out by ERC under its so-called internationally-accepted rate-setting methodology – the PBR or Performance Based Regulation – consumers do not stand a chance, at all.

Draft Determination
I will just cite a few choice quotes from some of the PBR documents, and leave the rest to your curious minds.

On December 15, 2010, in the “Review of Operating and Maintenance Expenditure (OPEX) Forecast: Third Regulatory Period” prepared by ERC’s Regulatory Operations Service, the ROS said: “In this review, the ROS has relied on the accuracy of the information provided to the ERC by MERALCO.

“While during the clarificatory meeting process, ROS queried on information provided in the revenue application that appeared to be inconsistent or inaccurate, ROS did not undertake an audit or attempt to verify the information on which it based itsrecommendations. ROS, therefore, cannot be held responsible for any conclusions based on misleading or inaccurate information provided.”

Also on December 15, 2010, in the “DRAFT DETERMINATION” on ERC Case No. 2010-069RC, signed by Chairman Zenaida Cruz-Ducut, Commissioners Alejandro Barin, Jose Reyes and Maria Teresa Castaneda, the ERC said in Item 1.3.2: “The Draft Determination is not a final resolution of MERALCO’s applications. Xxx Moreover, the Draft Determination does not have any impact or bearing on MERALCO’s current distribution wheeling charges or will not be used to set future distribution wheeling charges.”

Final Determination
On June 6, 2011, in Page 6 of the FINAL DETERMINATION signed by Chairman Cruz-Ducut and Commissioners Barin, Reyes, Castaneda and Rauf Tan, the ERC said: “The Final Determination is the final resolution of MERALCO’s application. It presents the ERC’s final decision on the price control arrangements that will apply to MERALCO for the Third Regulatory Period and will form the basis on which MERALCO will prepare and submit its distribution rate applications for the Third Regulatory Period. Xxx These rate structures are to be filed with the ERC by June 13, 2011. Xxx The implementation of the new rate structures for the July 2011 billing period is the scheduled start of the Third Regulatory Period (July 1, 2011)…..”

On December 8, 2008, Res. No. 20, S. 2008 was adopted unanimously by Chairman Cruz-Ducut and Commissioners Barin, Reyes, Castaneda and Tan, Modifying the “Rules for Setting Distribution Wheeling Rates for Privately Owned Distribution Utilities Entering Performance Based Regulation (RDWR), with Article VII on the Regulatory Reset Process, providing in Item 7.2.4, as follows: “At these hearings the ERC will have the opportunity to question the Regulated Entity on its proposed distribution tariffs and parties of record to the rate case will have the opportunity to cross-examine witnesses put forward by the Regulated Entity to defend its application.”

There is, however, a limitation to this cross-examination stated in Footnote 21 to this rule, to wit: “Note that the questions and cross-examination will only be allowed on aspects relevant to the rate application and not on earlier regulatory decisions or the basis on which these were made. For example, cross-examination on aspects decided by the ERC in its final determination on the price control arrangements for the relevant Regulatory Period will not be accepted at the hearings.”

Beyond Challenge
A Commission that started the rate process disavowing responsibility for its conclusions, virtually railroads the filing of the rate translation, eventually ends up elevating itself to an absurd level of infallibility, placing its determinations, no matter how infirm, beyond challenge on cross-examination.

Incredibly, ERC in PBR wants us to dissociate the so-called rate translation from ERC’s Rate Determinations which are the bases of that translation, especially when ERC has yet to resolve questions and issues raised by consumers on many major aspects of those Determinations.

This ERC PBR boggles the mind and beggars the poor.

If we did not have Mang Naro and Pete, we would already have drowned in all the oxymorons and non-sequiturs ERC has been spewing out lately.

And, we would have lost our shirts in the bargain, too.

Time we did something about our power rates, which is among the highest in the world.

Together with Dave Diwa, who has made his mark in consumer advocacies, we will organize – walk the talk – for Meralco customers.