Milking Customers Dry
Worse, Meralco does not even need a rate hike to remain viable or profitable. It has been earning way beyond what it should at the expense of consumers. From 1987 to 2007, for instance, Meralco earned a total return of P39.28 billion. Its total paid-up capital during the period meanwhile was only P441.6 million. (Nasecore: 2009)
What do these figures mean? They show that from 1987 to 2007, Meralco’s annual rate of return was a whopping 423 percent. It is scandalous to say the least. The acceptable level of rate of return is only 12 percent for public utilities. (Supreme Court: 2002)
Meralco owners have been milking customers dry throughout the years. Yet customers are today forced to shell out more money not only to finance Meralco’s operations. They are also asked to pay more so Meralco owners can increase their already outrageous profits.
Further, Epira institutionalized private monopoly control over the power sector. Meralco, aside from its captured market in distribution, also has its own IPPs. This allowed the firm to overcharge as much as P49.56 billion from June 2003 to June 2006. The amount represents the difference between the generation rates of Napocor IPPs and Meralco IPPs. (Nasecore: 2009)
Indeed, its customers have not only long paid whatever increases in rates that Meralco is asking for. It is Meralco that owes consumers. Until today, it has not even completed the past refunds ordered by the Supreme Court and ERC worth more than P34.12 billion.
Toward Lower Power Cost
The power sector certainly needs restructuring. But such reforms must be within the framework of nationalization and effective people’s control. To pave the way for these reforms, Epira must be repealed.
In the immediate, the courts and ERC must be pressured to issue a restraining order on approved rate hikes. Pending petitions should also be strongly opposed. Current rate setting methodology must be reviewed to capture the more important public interest. To do this, the review process must be democratic and participatory.
At the same time, concrete measures to bring down the cost of electricity must be implemented now. These include some policy proposals long pushed by consumers and advocacy groups, to wit:
(1) Scrap the VAT on power and oil;
(2) Refund to customers all illegal collections by Meralco, other distribution utilities, and Napocor;
(3) Stop the imposition of questionable charges like system loss, which is partly associated with a firm’s inefficiency;
(4) Cancel onerous IPP contracts to liberate consumers from paying unused electricity;
(5) Credible and thorough audit of financial records of Napocor, Meralco, and other players in the power sector (i.e. COA plus a parallel audit by consumer groups, independent experts, etc.) (Bulatlat.com)
References:
• Nasecore, FOVA, FOLVA vs. Meralco, Reply to Meralco’s Comment (With Urgent Prayer To Grant Restraining or Status Quo Order, Court of Appeals, Special Fourteenth Division, CA-GR SP No. 108663, September 22, 2009
• Republic vs. Manila Electric Co., GR No. 141314, 391 SCRA 700, 708, November 15, 2002
• Beiwald, Bruce et al (1997). “Performance-Based Regulation in a Restructured Electricity Industry”, Prepared for the National Association of Regulatory Utility Commissioners, Cambridge, MA, November 8, 1997
• “Plug power rate hike loophole”, Philippine Daily Inquirer, January 1, 2010
• “Meralco income to rise due to 2-step gov’t favor”, Malaya, January 6, 2010,
• “Napocor seeking increase in generation rates nationwide”, GMANews.TV, January 8, 2010
• “Meralco cuts rates”, The Philippine Star, January 9, 2010,
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