ERC Must be Cured Not Abolished Nor Crippled

Posted on: Sep 16, 2017

David Celestra Tan, MSK
15 September 2017

There is no question that the ERC has not been living up to its mandate to protect the consumers, to assure long term supply at fair and reasonable rates. In our book we give them a grade of 65% as an institution, failing in many measures. Our electricity rates are the highest in Asean because of this failure.

We interact with many of their Commissioners, directors, and employees and most of them are competent professionals with true dedications to public service. That’s why we are scratching our heads why this agency as an institution has been doing so badly as an electric industry regulator and seemingly cannot find its way back to true public service.

Many members of Congress, and the consumers they represent, are frustrated with the regulatory agency and it is understandable that they would use whatever congressional power (like budget approvals) they have to jolt this organization if only to make them shape up. The threat to give them only P1,000 budget is a major message. It could cripple the critical public services agency though and we lose the 65% that they do right. Further, we would be barking at the wrong tree.

The Energy Regulatory Commission badly and urgently needs to be reformed in their regulatory philosophy, rate setting methodology, transparency, honesty, and commitment to their mandate under Section 43 of the Epira Law that created it. No argument about that. The Epira Law may even have to be amended.

Things have to start with giving it proper leadership and the President of the Philippines is in a position to do so by appointing a good Chairman. One chosen for integrity, competence, and independence from major power industry players.

There is really no need to shorten the tenure of the now more experienced current four (4) Commissioners. What they need is a new clear mandate from the President. It can be as simple as a “do your job and be faithful to your mandate under Section 43 of the Epira Law. Be transparent and no corruption. Serve the public interest. Create competition and reduce rates. Do what is necessary. No sacred cows” (this last one is very important).If they are disobedient, then the President may need a new team. But first he has to find a good leader who can carry the torch for the consumers.

To be fair, most of what ails the regulatory agency were done by the previous Chairmen and Commissioners. However, the new set of officers have no excuse in not correcting the anti-consumer methodologies.

Abolishing the ERC will cause infinitely more harm and disruption than good. The options for performing the regulatory functions are much worse. Even creating a new regulatory agency will set us back and the consumers are the ones who will suffer.

So how do we gauge whether the current ERC is not beyond salvaging?

Your consumer organization has filed with the ERC several petitions to improve the methodologies and those can be used as tests of whether the current ERC can still serve the public interests or is already hopelessly compromised.

1. Petition to change the PBR Rate Making Methodology to prevent overcharging

The ERC is allowing Meralco to make money on things they have not invested. Under PBR they have effectively deregulated the profit limits of this public service utility. They took the position that the 12% limit ruled by the country’s Supreme Court does not apply because the “economic conditions” are different. Now Meralco regularly makes a 25% annual return on equity AFTER TAX. We would like ERC to be on the side of the consumers and country. Itama lang natin.

2. Systems Loss

The ERC’s own rules put a limit of 8.5% systems loss. But the captive customers that use 70% of Meralco’s energy are charged more than 10.3%. Instead they reduce the systems loss to industrial customers to only 4% and have the temerity to boast that their systems loss is only 6.5% which is the overall average. A regulatory agency with their hearts in the right place for consumers would enforce the 8.5% limit and no customer should be charged higher. It is Meralco’s option to charge certain customers lower but never higher than the 8.5% limit. Itama lang natin.

3. Guard Against Cartelization

It can be argued that the ERC Commissioners committed a misjudgment when they inexplicably extended the deadline of the CSP implementation by six months that enabled Meralco to fast track the signing of 3,551mw of midnight contracts four (4) days before the new deadline. The courts will decide whether there were improprieties.

The ERC however has a clear obligation to assure that the negotiated contracts did not create a cartel and cartelization is clearly prohibited by the Epira Law. The ERC’s duty to investigate and assure that there is no cartelization cannot be disputed.

Your consumer organization MSK has filed a petition with the ERC to investigate and stop the resulting Meralco Cartel. This would be a loud indicator of for whom the ERC Commissioners bell tolls. Consumers or vested interests? Itama lang natin sana.

The ERC needs to be cured not abolished nor crippled. But let us wait to see which one they deserve. In many ways the fate of the institution is in their hands.

MatuwidnaSingilsaKuryente Consumer Alliance Inc.


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