Meralco’s P6.9-B refund ordered paid in 3 months

The Energy Regulatory Commission (ERC) has ordered dominant power distributor Manila Electric Co. (Meralco) to refund P6.9 billion in over-recoveries to electricity users within three months instead of 36 months based on its petition to firm petitioned. 

The Freedom from Debt Coalition (FDC) lauds the Energy Regulatory Commision’s (ERC) latest order.

“Based on initial estimates, this can be a 75 centavos per kilowatthour (kWh) refund, more than enough to offset the P0.22 per kWh generation rate recovery MERALCO is trying to collect for the Malampaya shutdown in 2013,” FDC said.

The refund is based on an ERC rule that requires utilities under the Performance Based Regulation (PBR) to file every three years for over or under recoveries in generation, transmission, system loss, lifeline subsidy and senior citizen discount.

All these charges are supposed to be pass-thru where MERALCO is revenue neutral, i.e., none of it goes into its revenue stream. The present order covers 2014 to 2016.

“We welcome this immediate relief but at the same time call for a deeper probe into the underlying ‘principles’ that prop up these charges,” FDC said.

Are these over and under recoveries chargeable costs, to begin with, and are they properly verified and audited or validated, FDC asked.

The generation component, which is P4.9 billion in this case, is already charged to consumers at the end of each month as the “blended generation rate”, the sum-total of all generation supply for that month.

In addition, Meralco charges consumers working capital which also runs into billions to cover the lag between billing and collection for these services. “Where and how does this deficiency or surplus occur?”, FDC asked.

FDC warned that while it is a refund in this cycle, there were claims of under recoveries in the past.

According to FDC, the item system lossis another major concern and this accounted for P1.2 billion of the refund.

System loss, under ERC rules, “is the difference between the kilowatt hour purchased and/or generated and KWH sold plus company use.”

FDC pointed out, this is another cost based on the same generation basket for which we are already charged under the blended rate and a separate generation under recovery.

The system loss allowance should be limited to or capped based on the distribution cost only because this is where line loss and pilferage occurs, FDC explained.

Based on ERC records, there are claims for under recoveries of P3.7 billion in the first three (3) cycles but consumers have challenged these claims, particularly for the years 2012 to 2013.

“These novel and outlandish charges are emblematic of the regulatory morass resulting from PBR”, FDC said as it pursued initiatives to scrap PBR and revert to Return on Rate Base (RORB), with modifications.

RORB is straightforward and direct – utilities invest and spend for the service they are bound to provide under their franchise and later go to ERC for approval of the rates that will allow them to recover their investments.

Under PBR, all costs are collected in advance, including cost of equipment, and in a complex set of redundant and overlapping charges, consumers are paying two or more times for some costs.

“The immediate relief that comes from this ERC order is most welcome – a 200kWh household will be refunded P150.00 per month — but the more pressing concern is the deeper and longer term look at the lop-sided rules of PBR and ERC,” FDC reiterated.

FDC also warned that the pay out mechanics have to be watched closely to make sure that in the offset of the refund against monthly consumption, consumers are not refunding themselves with power they were already charged for, in advance, under PBR. RIZA LOZADA