Consumer Group Matuwid na Singil sa Kuryente Consumer Alliance Inc. (MSK) filed a rules change petition at the Energy Regulatory Commission seeking the repeal of the Performance Based Rate Making methodology that is used to determine electricity rates to the consumers.
The consumer group estimates that the PBR caused an unjustified increase of Meralco’s distribution charges by P0.40 to P0.80 per kwh.
MSK Executive Director Aya Viray-Jallorina said the PBR is illegal because it allows for charging to consumers the projected investments of distribution utilities. This violates Section 25 of Republic Act 9136 or EPIRA law, that specifically require that retail rates must be based on economic costs (or investments) incurred. Projected investments are not yet incurred and hence the resulting rate is illegal.
Worse, the ERC’s PBR rules do not even require a validation of whether the projected investments that are being charged to the consumers have actually been made by the utility.
In its petition filed December 22, 2015 MSK alleged that the ERC’s legal basis for its right to adopt PBR as an alternative to the old Return on Rate Base of RORB appear to be erroneously interpreted. ERC’s right to adopt an alternative is premised on the requirement that the alternative be “in the public interest” which means it should be an improvement over the old methodology of RORB that it replaced. Improvement can only mean lower rates or improved efficiency at the same rates.
While it is true that the law allowed the ERC to consider alternative methodologies that can improve efficiency and result to reasonable rate of electricity, we believe this should not be done unless it is in the public interest. PBR did not result to reasonable rate of electricity. The previous Commissioners of the ERC abused its discretion in adopting the PBR alternative to the RORB.
In June 2015, Meralco, the country’s Largest distribution utility, filed for a reduction in its distribution charge by about P0.18 per kwh. MSK is similarly intervening in that reduction to assure that the reduction is sufficient and that further reduction may not be needed. Meralco had been charging PBR based rates since 2007.
MSK is proposing a modification in the rate making rules to assure that Meralco’s distribution charges to consumers are only based on investments they incurred and not forecasted or promised. ERC’s rules do not even require validation of the promised investments by the regulatory commission before the additional fees are charged to the consumers. This is most unfair and unreasonable to consumers.
In their petition, MSK pointed out the audit report of foreign consultants hired by the ERC discovered that Meralco had 1.2 million kwh meters when they only had 200,000. Also too much provision were made for purchases of distribution transformers from Lopez owned Philec, way beyond the actual needs of Meralco. In their PBR application Meralco also tried to charge consumers about P3.0 billion for regulatory compliance which the auditors reduced by 90%.
MSK’s petition for rules change is part of the consumer groups campaign to reduce Meralco’s total rate by at least P3 per kwh.