MSK Petitions ERC for Meralco Refund of P2.39 Billion Overrecovery

David Celestra Tan, MSK
3 October 2016

Your consumer advocacy group, Matuwid na Singil sa Kuryente Consumer Alliance had filed a petition with the Energy Regulatory Commission to compel to Meralco to refund to the consumers an estimated overrecovery of at least P2.39 billion.

The overrecovery can actually be as high as P5 billion and was discovered by MSK during its crossexamination of Meralco’s rate setting experts on the computation of the recovery from 2011 to 2015 of an underrecovery from 2007 to 2011.

It might be recalled that Meralco offered to reduce its distribution charge in July 2015 from P1.59 per kwh by P0.188 which was the component of the rate intended to allow them to recover an under recovery from a previous regulatory period. Actually Meralco’s authority to charge that extra P0.188 expired on June 30, 2015 and it would have been illegal for them to continue charging that beyond that date. Nice media spin on their part to announce it as a voluntary reduction.

The P0.188 per kwh was computed by assuming an energy sales level in kwh for the years 2011 to 2015. That forecasted energy sales was based on an annual growth rate of 3%. Meralco itself had been announcing that its energy sales growth actually has been 6 to 7% per year.

MSK had filed for intervention to determine that the P0.188 per kwh reduction that Meralco volunteered and publicized was actually correct and sufficient.

Evidently Meralco had recovered almost double the amount it was authorized to recover. We believe that Meralco should not be allowed to profit from recovering an under recovery that was authorized by the ERC. It could be as high as P5 billion.

MSK had petitioned the ERC to compel Meralco to submit the true figures for the amount of the authorized underrecovery for 2007 to 2011, the amount they have recovered in 2011 to 2015, and to submit a refund schedule for the excess recovery plus interest.

During MSK’s cross examination, Meralco’s rate setting expert said that if Meralco’s, actual sales are higher, like when its sales grew 6% instead of 3.7% per year, that ERC rules allow them to keep the difference as profit.

This if true is a very dangerous rate setting methodology and exposes the Meralco consumers to rate abuse and manipulation. This also means Meralco, as a regulated distribution monopoly is effectively no longer regulated in its net profit as most people still believed. Is this really now the policy? The more we learn about the schemes between the ERC and Meralco the more we see the abuse of the consumers and the total lack of safeguards.

Meralco’s lawyers responded to the ERC that MSK’s request is irrelevant to the petition and that these issues must be included in the rate setting for the Fourth Regulatory Period of July 2015 to June 2019.

With these kind of rate methodologies, Meralco consumers continue to be overcharged and abused.

Let us hope the new ERC will demonstrate more caring for the electric consumers. Let us see if they will act to correct this overcharge immediately by ordering a refund.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.


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