DIE HARD III
Herman Tiu Laurel
7/2/2012
The Energy Regulatory Commission (ERC) has again approved new rates for the Manila Electric Co. (Meralco) for the new regulatory year starting July 1, 2012 to June 30, 2013 on the strength of only a provisional authority (PA) before pending issues are resolved. The latest PA was issued on top of several previous PAs for 2010, 2011, and 2012.
For one, our fellow crusader, Mang Naro Lualhati, has pending, unresolved petitions on Meralco's Maximum Average Price (MAP), insisting that it should only be P0.90 per kilowatt-hour (kWh) as against ERC-approved rates that used to be around P1.60/kWh but now even raised to P1.6303/kWh. Another colleague of ours, Iligan Light and Power's Jojo Borja, has produced evidence of up to 900-percent overpricing of Meralco's costs that served as the basis for its rate hike applications before the ERC. Both of these were already brought to the courts for resolution; yet the ERC continues to issue its PAs.
Just what is the urgency of issuing these rate increases via these PAs when Meralco has continued to reflect annual increases in profits since 2006 up to the current year?
Last Feb. 2012 it was announced in the headline, "Meralco profit surges 40 percent," that the power company's "core net income, which strips out currency and derivatives-related items, climbed 22 percent to P14.9 billion from a year ago… (exceeding) the profit guidance of P14.5 billion." But take note of this: The power firm, which is indirectly controlled by Hong Kong-based First Pacific Co. Ltd. and partly owned by San Miguel Corp., "had 5.3 million customers last year, up 3.7 percent from a year ago."
Meralco says that its profits rose due to an increased number of customers, but a 40-percent increase in profits cannot be due to a mere 3.7-percent increase in customer base as its own media statement claims. That profit rise is simply from the price gouging rates that the ERC has been giving "provisionally" to Meralco over at least the past three regulatory years.
From a recent letter of our colleague Butch Junia: "Meralco's net earnings have soared year on year: P3.1 billion in 2008; P6.3 billion in 2009; P10.1 billion in 2010; P14.8 billion in 2011. For the year 2010, customer base grew 3 percent; sales increased 11 percent, but earnings soared 67 percent--which obviously came from rate increases rather than market growth or operational efficiencies … Best for the utility, hardly good for the public."
Again, with such profits, what is the urgency of granting PAs for rate increases to Meralco?
Such profit surges are only possible with the massive overpricing of Meralco costs, such as 500 percent on the tens of thousands of power transformers, 900 percent on electric poles, and similarly overpriced substations, contractors, ad nausea.
At the heart of the abuse, however, is ERC's continued defiance of a 2004 Supreme Court (SC) decision under Chief Justice Reynato Puno upholding the old 12-percent Return-on-Rate Base (RoRB) formula as the legal and just basis for setting power rates.
As Junia recaps: "Shortly after that (SC) decision, the ERC started the shift from RoRB to Performance Based Regulation (PBR) with the adoption of rate unbundling in 2003, and full PBR in 2007. Under RoRB, the distribution, supply and metering charge of Meralco was P0.70/kWh; under rate unbundling it was P0.90/kWh. With PBR, it was P1.2227/kWh in 2009, P1.491 in 2010, P1.6464 in 2011, P1.60 in 2012, to go up to P1.633 in July 2012-June 2013."
The PBR effectively raises Meralco's rate of return to over 15 percent; but that is not all. The ERC also provided incentives that added on pushed distribution utility (DU) returns to as high as 17 percent. But these are not the only problems residential consumers have with the present electricity rate-setting system, but are rarely told.
As Junia writes in his letter, the ERC "is mandated by the Electric Power Industry Reform Act (Epira) to 'ensure (for consumers) a reasonable price of electricity… (where) the rates prescribed shall be non-discriminatory.'"
Still, we see in Meralco's petition "for distribution charges… an increase to P1.962/kWh from P1.078/kWh for residential consumers using up to 200 kWh, P1.5535/kWh from P1.3851/kWh for those consuming 201-300 kWh, P1.5535/kWh from P1.3851/kWh for consumers of 301-400 kWh, and P2.4780/kWh from P2.3096/kWh for those that use over 400 kWh per month. Industrial users, meanwhile, with a minimum demand of 40 kW to less than 200 kW would have their supply charges raised to P990 from the current P910 … Large industrial users that consume 200 kW to less than 750 kW will pay supply charges of P4,110 while industrial users of 750 kW to less than 10,000 kW have to pay P14,920…"
Note: Up to 10,000 kW industrial users pay P1.49/kW but residential consumers using 201 kWh to 400 kWh pay P1/55/kWh to P2.30/kWh, while industrial and commercial power consumers using even higher kWh, such as shopping malls which go into millions of kWh, can pay as low as P0.20/kWh in distribution charges.
Residential users consume roughly 35 percent of distributed power but provide around 65 percent of Meralco's revenues, which is inversely proportional to industrial/commercial customers. Thus, residential consumers subsidize everyone else.
Soon the "open access" policy will push even higher rates for residential users as Meralco and DUs court industrial/commercial consumers with lower rates to prevent them from setting up their own power plants.
Meanwhile, "Shares of Meralco closed at P253.40 on Friday, up 0.96 percent from its previous close of P251 apiece"--this as the national economy suffers, as exemplified by the recent statement of businessman Robert Go, director of the Philippine Retailers Association and chairman of the Economic Development Committee of the Regional Development Council (RDC) saying "Because of these big power expenses, most of the profits of businessmen in the past year were wiped out and if this will continue, the workers will be affected because their employers can hardly adjust wages."
Stated simply, the power oligarchs are killing every one of us. Time to fight back.
(Watch Destiny Cable GNN's HTL edition of Talk News TV, Saturdays, 8:15 to 9 p.m., with replay at 11:15 p.m., this week with senatorial candidate Joey de Venecia; visit http://newkatipunero.blogspot.com for our articles plus TV and radio archives)
For one, our fellow crusader, Mang Naro Lualhati, has pending, unresolved petitions on Meralco's Maximum Average Price (MAP), insisting that it should only be P0.90 per kilowatt-hour (kWh) as against ERC-approved rates that used to be around P1.60/kWh but now even raised to P1.6303/kWh. Another colleague of ours, Iligan Light and Power's Jojo Borja, has produced evidence of up to 900-percent overpricing of Meralco's costs that served as the basis for its rate hike applications before the ERC. Both of these were already brought to the courts for resolution; yet the ERC continues to issue its PAs.
Just what is the urgency of issuing these rate increases via these PAs when Meralco has continued to reflect annual increases in profits since 2006 up to the current year?
Last Feb. 2012 it was announced in the headline, "Meralco profit surges 40 percent," that the power company's "core net income, which strips out currency and derivatives-related items, climbed 22 percent to P14.9 billion from a year ago… (exceeding) the profit guidance of P14.5 billion." But take note of this: The power firm, which is indirectly controlled by Hong Kong-based First Pacific Co. Ltd. and partly owned by San Miguel Corp., "had 5.3 million customers last year, up 3.7 percent from a year ago."
Meralco says that its profits rose due to an increased number of customers, but a 40-percent increase in profits cannot be due to a mere 3.7-percent increase in customer base as its own media statement claims. That profit rise is simply from the price gouging rates that the ERC has been giving "provisionally" to Meralco over at least the past three regulatory years.
From a recent letter of our colleague Butch Junia: "Meralco's net earnings have soared year on year: P3.1 billion in 2008; P6.3 billion in 2009; P10.1 billion in 2010; P14.8 billion in 2011. For the year 2010, customer base grew 3 percent; sales increased 11 percent, but earnings soared 67 percent--which obviously came from rate increases rather than market growth or operational efficiencies … Best for the utility, hardly good for the public."
Again, with such profits, what is the urgency of granting PAs for rate increases to Meralco?
Such profit surges are only possible with the massive overpricing of Meralco costs, such as 500 percent on the tens of thousands of power transformers, 900 percent on electric poles, and similarly overpriced substations, contractors, ad nausea.
At the heart of the abuse, however, is ERC's continued defiance of a 2004 Supreme Court (SC) decision under Chief Justice Reynato Puno upholding the old 12-percent Return-on-Rate Base (RoRB) formula as the legal and just basis for setting power rates.
As Junia recaps: "Shortly after that (SC) decision, the ERC started the shift from RoRB to Performance Based Regulation (PBR) with the adoption of rate unbundling in 2003, and full PBR in 2007. Under RoRB, the distribution, supply and metering charge of Meralco was P0.70/kWh; under rate unbundling it was P0.90/kWh. With PBR, it was P1.2227/kWh in 2009, P1.491 in 2010, P1.6464 in 2011, P1.60 in 2012, to go up to P1.633 in July 2012-June 2013."
The PBR effectively raises Meralco's rate of return to over 15 percent; but that is not all. The ERC also provided incentives that added on pushed distribution utility (DU) returns to as high as 17 percent. But these are not the only problems residential consumers have with the present electricity rate-setting system, but are rarely told.
As Junia writes in his letter, the ERC "is mandated by the Electric Power Industry Reform Act (Epira) to 'ensure (for consumers) a reasonable price of electricity… (where) the rates prescribed shall be non-discriminatory.'"
Still, we see in Meralco's petition "for distribution charges… an increase to P1.962/kWh from P1.078/kWh for residential consumers using up to 200 kWh, P1.5535/kWh from P1.3851/kWh for those consuming 201-300 kWh, P1.5535/kWh from P1.3851/kWh for consumers of 301-400 kWh, and P2.4780/kWh from P2.3096/kWh for those that use over 400 kWh per month. Industrial users, meanwhile, with a minimum demand of 40 kW to less than 200 kW would have their supply charges raised to P990 from the current P910 … Large industrial users that consume 200 kW to less than 750 kW will pay supply charges of P4,110 while industrial users of 750 kW to less than 10,000 kW have to pay P14,920…"
Note: Up to 10,000 kW industrial users pay P1.49/kW but residential consumers using 201 kWh to 400 kWh pay P1/55/kWh to P2.30/kWh, while industrial and commercial power consumers using even higher kWh, such as shopping malls which go into millions of kWh, can pay as low as P0.20/kWh in distribution charges.
Residential users consume roughly 35 percent of distributed power but provide around 65 percent of Meralco's revenues, which is inversely proportional to industrial/commercial customers. Thus, residential consumers subsidize everyone else.
Soon the "open access" policy will push even higher rates for residential users as Meralco and DUs court industrial/commercial consumers with lower rates to prevent them from setting up their own power plants.
Meanwhile, "Shares of Meralco closed at P253.40 on Friday, up 0.96 percent from its previous close of P251 apiece"--this as the national economy suffers, as exemplified by the recent statement of businessman Robert Go, director of the Philippine Retailers Association and chairman of the Economic Development Committee of the Regional Development Council (RDC) saying "Because of these big power expenses, most of the profits of businessmen in the past year were wiped out and if this will continue, the workers will be affected because their employers can hardly adjust wages."
Stated simply, the power oligarchs are killing every one of us. Time to fight back.
(Watch Destiny Cable GNN's HTL edition of Talk News TV, Saturdays, 8:15 to 9 p.m., with replay at 11:15 p.m., this week with senatorial candidate Joey de Venecia; visit http://newkatipunero.blogspot.com for our articles plus TV and radio archives)
