PEOPLE'S STRUGGLE
Herman Tiu Laurel
9/10-16/2012
THE dispute exploded into the public scene last week as Meralco grandiosely announced that PSALM (Power Sector Asset Liabilities Management) owed Meralco customers a P 9.1-billion refund for double charging in transmission line costs.
PSALM countered, saying that Meralco's charges are "unfounded and at best, premature considering that the final amount is yet to be determined after the ERC approves the implementation of a refund or collection scheme on compliance of the parties with the directives of the regulatory body". In the first place, this overcharging has the consent of the Energy Regulatory Commission (ERC) based on its issuances of provisional and various automatic increases in power rates.
They're all to blame
We wrote about the ERC's practice of approving rate increases posthaste with promises to review later ("True up or Throw up", August 8-14 issue). "Under recoveries" or "over recoveries" or "over under recoveries" are decided, but they're always charged to consumers first. This is what happened in the Meralco vs. PSALM dispute. Consumers already paid. The confusing "recovery" terminologies came with EPIRA and the ERC's "PBR" – Performance Based Rate mechanism allowing 15.6% profit margin plus incentive that can reach to 17%. Before the PBR in 2004 we had the RORB, Return-On-Rate-Base limited to 12%. The crucial difference is not only the cap on profit but, as Jojo Borja of Iligan Light and Power Inc. again reminds me, the automatic "pass on" of generation increases under the PBR which was never the case under the RORB.
One of the key factors is the WESM, Wholesale Electricity Spot Market, which allocates power contracts amongst the IPPs and PSALM to ensure that every "investor" gets a "fair" share of the power supply contracts – and never mind if it's not fair to consumers and taxpayers. WESM "spot" market prices have gone as high as P60 to P 70/kWh when Napocor rates can in the same period hover just around P5/kWh. DUs like Meralco pass it on and ERC does nothing about it.
Gibberish
PSALM CEO Emmanuel R. Ledesma Jr. explained "… that the alleged double charging in transmission line costs arose out of the simultaneous implementation of the transition supply contract (TSC) between National Power Corp. (Napocor) and Meralco and of the price determination methodology (PDM) in the wholesale electricity spot market". i.e. the WESM. Ledesma continues, "PSALM cannot deviate from either until an effective segregation mechanism from Philippine Electricity Market Corp. (PEMC) is approved by the Energy Regulatory Commission (ERC)," More gibberish: "PEMC (Phil. Elec. Market Corp., the Board of WESM) earlier commented that 'the segregation of line rentals into transmission loss and congestion cost … of the WESM would entail reconstruction of hourly data … would cause considerable strain in its resources." Gibberish again. PEMC and WESM are parasites.
The ERC portrays itself as the solution: "Energy agency to decide on P9.1B controversy", a September 5 headline reads. The truth is ERC is the main part of the problem for completely failing in its regulatory duty, overlooking the double-charging and allowing it to fester for two years causing great damage to consumers. This is clear in this report, "The ERC, in a decision dated March 10, 2010, already found a 'double charging in transmission line costs.'
But compliance by various parties involved was incomplete as some of the data needed for the computation were no longer available…" If ERC had found "double charging" way back in the first quarter of 2010 or over and a half years ago it should have acted swiftly to save the public the billions of pesos. ERC's superfluous explanations excuses today are more unnecessary gibberish.
Meralco refunds due
Every power consumer should be pressuring the authorities and Meralco posthaste to refund what it owes to consumers. The 2003 Meralco refund of P 30 billion to consumers for an illegal "provisional increase" in 1994, ordered by the Puno Supreme Court, is supposed to be completed by 2015; but the critical question crusader Butch Junia has raised is the question of where Meralco is drawing the funds for the refund. Meralco should have paid the refund from its equity and not from the cash flow from the payment of Meralco power consumers; otherwise it would be the consumers paying the refund to their selves. Junia has more to tell consumers to demand from Meralco.
Meralco should immediately refund the P 14-B it gypped from Napocor when it reneged on its supply contract with it, which Meralco now wants to conspire with Napocor to pass on to consumers. Consumers however should demand P 42 billion on top of this P 14 billion because of interests and write offs Meralco finagled in its negotiations with Napocor to settle the matter. Mang Naro Lualhati, one of those who won the P 30-B refund for all consumers in 2003 demands that Meralco refund close to P 40-B in the 100% overprice of the Maximum Average Price (MAP) ERC approves for Meralco of P 1.60/kWh which, by Lualhati's (an accountant) computation should be no more than P 0.90/kWh. Mr. Jojo Borja of Iligan Light is charging Meralco of overpriced asset bases such as electric poles, transformers and sub-station, inflated by as much as 500% to 900% - all this documented.
Meralco should also refund the P 2.2-B "regulatory liaison", a budget that Meralco and ERC has never explained to any degree of satisfaction. Butch Junia also points out the P 14-B refund Meralco owes the public which was discovered when the Commission on Audit (COA), was ordered by the 2003 Supreme Court to test audit two years of Meralco's operation (2004 and 2007, if my memory serves me right) and found in just one year test audit P 2.7-B overcharging. Projecting from that result the P 14-B is the sum total. The Meter Deposit Refund (MDR) is also a gigantic amount. Decided since 2004, it was mandated to start in 2008 and to be completed within five years, consumers should be checking if this has been on schedule; it must be asked if interest was charged on this meter deposit, and paid to the consumers.
Solution
The Filipino taxpayers and power consumers are beset by the "highest power rates in the world". In 2003 the Puno Supreme Court made milestone decisions to support the citizen crusaders cause against the power rate abuses of Meralco, by affirming the primacy of the 12% Return-On-Rate-Base (RORB), disallowed Meralco from charging its income tax to customers, ordered a COA audit of Meralco finding billions in overcharging. Government never followed through with the 2003 SC decisions. ERC, distorting EPIRA's ill-conceived license for it to formulate rate setting methodologies, set up the PBR (Performance Based Rate) upping to 17% allowable profit margins for the Distribution Utilities like Meralco ) and establishing "automatic increases" on power generation and passed on to consumers.
Ten years of power crises have educated the Filipino people in the evils of the EPIRA and the conspiracy of the power oligarchs, the politicians and the ERC. There is so much more for the public to learn, such as what WESM, the PEMC, PBR, MAP, ARR ad nausea but it should all be simplified: the EPIRA and the PBR are the root evils, they must be junked.
Malacañang must be blamed squarely, then Congress, for not doing anything about this. The people must push for the repeal of EPIRA and reversal of the PBR. If needed the people must take action in the streets, the Internet, the social media networks, and media. The Freedom from Debt Coalition (FDC) is launching a series of activities in October which we should all support; we will announce these in due time. Our comrades in Mindanao, like Jojo Borja and Louie Corral, are doing their share. The solution to the power abuse lies in the People's Struggle.
PSALM countered, saying that Meralco's charges are "unfounded and at best, premature considering that the final amount is yet to be determined after the ERC approves the implementation of a refund or collection scheme on compliance of the parties with the directives of the regulatory body". In the first place, this overcharging has the consent of the Energy Regulatory Commission (ERC) based on its issuances of provisional and various automatic increases in power rates.
They're all to blame
We wrote about the ERC's practice of approving rate increases posthaste with promises to review later ("True up or Throw up", August 8-14 issue). "Under recoveries" or "over recoveries" or "over under recoveries" are decided, but they're always charged to consumers first. This is what happened in the Meralco vs. PSALM dispute. Consumers already paid. The confusing "recovery" terminologies came with EPIRA and the ERC's "PBR" – Performance Based Rate mechanism allowing 15.6% profit margin plus incentive that can reach to 17%. Before the PBR in 2004 we had the RORB, Return-On-Rate-Base limited to 12%. The crucial difference is not only the cap on profit but, as Jojo Borja of Iligan Light and Power Inc. again reminds me, the automatic "pass on" of generation increases under the PBR which was never the case under the RORB.
One of the key factors is the WESM, Wholesale Electricity Spot Market, which allocates power contracts amongst the IPPs and PSALM to ensure that every "investor" gets a "fair" share of the power supply contracts – and never mind if it's not fair to consumers and taxpayers. WESM "spot" market prices have gone as high as P60 to P 70/kWh when Napocor rates can in the same period hover just around P5/kWh. DUs like Meralco pass it on and ERC does nothing about it.
Gibberish
PSALM CEO Emmanuel R. Ledesma Jr. explained "… that the alleged double charging in transmission line costs arose out of the simultaneous implementation of the transition supply contract (TSC) between National Power Corp. (Napocor) and Meralco and of the price determination methodology (PDM) in the wholesale electricity spot market". i.e. the WESM. Ledesma continues, "PSALM cannot deviate from either until an effective segregation mechanism from Philippine Electricity Market Corp. (PEMC) is approved by the Energy Regulatory Commission (ERC)," More gibberish: "PEMC (Phil. Elec. Market Corp., the Board of WESM) earlier commented that 'the segregation of line rentals into transmission loss and congestion cost … of the WESM would entail reconstruction of hourly data … would cause considerable strain in its resources." Gibberish again. PEMC and WESM are parasites.
The ERC portrays itself as the solution: "Energy agency to decide on P9.1B controversy", a September 5 headline reads. The truth is ERC is the main part of the problem for completely failing in its regulatory duty, overlooking the double-charging and allowing it to fester for two years causing great damage to consumers. This is clear in this report, "The ERC, in a decision dated March 10, 2010, already found a 'double charging in transmission line costs.'
But compliance by various parties involved was incomplete as some of the data needed for the computation were no longer available…" If ERC had found "double charging" way back in the first quarter of 2010 or over and a half years ago it should have acted swiftly to save the public the billions of pesos. ERC's superfluous explanations excuses today are more unnecessary gibberish.
Meralco refunds due
Every power consumer should be pressuring the authorities and Meralco posthaste to refund what it owes to consumers. The 2003 Meralco refund of P 30 billion to consumers for an illegal "provisional increase" in 1994, ordered by the Puno Supreme Court, is supposed to be completed by 2015; but the critical question crusader Butch Junia has raised is the question of where Meralco is drawing the funds for the refund. Meralco should have paid the refund from its equity and not from the cash flow from the payment of Meralco power consumers; otherwise it would be the consumers paying the refund to their selves. Junia has more to tell consumers to demand from Meralco.
Meralco should immediately refund the P 14-B it gypped from Napocor when it reneged on its supply contract with it, which Meralco now wants to conspire with Napocor to pass on to consumers. Consumers however should demand P 42 billion on top of this P 14 billion because of interests and write offs Meralco finagled in its negotiations with Napocor to settle the matter. Mang Naro Lualhati, one of those who won the P 30-B refund for all consumers in 2003 demands that Meralco refund close to P 40-B in the 100% overprice of the Maximum Average Price (MAP) ERC approves for Meralco of P 1.60/kWh which, by Lualhati's (an accountant) computation should be no more than P 0.90/kWh. Mr. Jojo Borja of Iligan Light is charging Meralco of overpriced asset bases such as electric poles, transformers and sub-station, inflated by as much as 500% to 900% - all this documented.
Meralco should also refund the P 2.2-B "regulatory liaison", a budget that Meralco and ERC has never explained to any degree of satisfaction. Butch Junia also points out the P 14-B refund Meralco owes the public which was discovered when the Commission on Audit (COA), was ordered by the 2003 Supreme Court to test audit two years of Meralco's operation (2004 and 2007, if my memory serves me right) and found in just one year test audit P 2.7-B overcharging. Projecting from that result the P 14-B is the sum total. The Meter Deposit Refund (MDR) is also a gigantic amount. Decided since 2004, it was mandated to start in 2008 and to be completed within five years, consumers should be checking if this has been on schedule; it must be asked if interest was charged on this meter deposit, and paid to the consumers.
Solution
The Filipino taxpayers and power consumers are beset by the "highest power rates in the world". In 2003 the Puno Supreme Court made milestone decisions to support the citizen crusaders cause against the power rate abuses of Meralco, by affirming the primacy of the 12% Return-On-Rate-Base (RORB), disallowed Meralco from charging its income tax to customers, ordered a COA audit of Meralco finding billions in overcharging. Government never followed through with the 2003 SC decisions. ERC, distorting EPIRA's ill-conceived license for it to formulate rate setting methodologies, set up the PBR (Performance Based Rate) upping to 17% allowable profit margins for the Distribution Utilities like Meralco ) and establishing "automatic increases" on power generation and passed on to consumers.
Ten years of power crises have educated the Filipino people in the evils of the EPIRA and the conspiracy of the power oligarchs, the politicians and the ERC. There is so much more for the public to learn, such as what WESM, the PEMC, PBR, MAP, ARR ad nausea but it should all be simplified: the EPIRA and the PBR are the root evils, they must be junked.
Malacañang must be blamed squarely, then Congress, for not doing anything about this. The people must push for the repeal of EPIRA and reversal of the PBR. If needed the people must take action in the streets, the Internet, the social media networks, and media. The Freedom from Debt Coalition (FDC) is launching a series of activities in October which we should all support; we will announce these in due time. Our comrades in Mindanao, like Jojo Borja and Louie Corral, are doing their share. The solution to the power abuse lies in the People's Struggle.
