Meralco Overcharging (Again): Refund, Rate-Hike Suspension, Rollback for Consumers


MANILA — The Energy Regulatory Commission (ERC) quickly dashed hopes by consumers expecting a refund or lower rates from the Manila Electric Company (Meralco). After the Commission on Audit (COA) disclosed two weeks ago that the power distribution firm overcharged its customers, the government agency said that it will still have to review the audit body’s report.

It gave Meralco 15 days to submit its comments on the COA findings and the deadline is around first week of March. After this, the ERC will conduct public hearings before it can decide to order a refund or rate reduction and by how much. It can also just disregard the report of COA and stick by Meralco’s claim that there was no overcharging. Based on experience, the whole process can take months to years. The ERC, in fact, has already delayed the process by one and a half months. It received COA’s report last December 23, 2009 but started to act on it only by mid-February.

Continuing Injustice

Meanwhile, a company official warned that Meralco’s close to five million customers face more rounds of rate hike in the months ahead due to tight power supply and higher demand caused by El Niño. Less rain means reduced hydropower generation capacity and lower power supply, while high temperature means increased electricity demand.

For consumers, it means continuing injustice as they shoulder additional power costs (on top of possible rotating brownouts) while Meralco delays accounting for its over-collections that could reach more than P7 billion. Thus, it is very reasonable for consumers to demand that whatever planned rate increases by Meralco must be disallowed by the ERC.

41-Centavo Rollback Justifiable

At the same time, the ERC must also be pressured to reverse its decisions last year that allowed Meralco to jack up its rates. These ERC rate hike decisions using the so-called Performance-Based Regulation (PBR) used the same cost assumptions that are now being questioned by the COA audit report. Unless issues raised by the COA on these cost assumptions were credibly resolved, Meralco is assumed to be continuously overcharging its customers.

In April and December last year, the ERC using the PBR method approved Meralco’s rate hike petitions that increased its distribution charge by a total of almost 41 centavos per kilowatt-hour (kWh). In light of the recent COA report, the current distribution rate of Meralco must be rolled back by the same amount – from P1.4917 to P1.0831 per kWh in order to correct the continuing injustice that its customers suffer.

The rate hikes implemented by Meralco and its latest cases of overpricing become more deplorable as the utility giant has not even completed until today the past refunds that it owes to consumers worth more than P34.12 billion, including the P30.2 billion in income taxes that Meralco illegally charged to consumers from 1994 to 2002.

Outside Pressure

Consumers must not expect the ERC to push for the refund at its own initiative. There must be strong outside intervention from consumers, both political and legal. As Meralco said in response to the COA report, there is no overcharging because its rates were approved by the ERC.

In other words, not only Meralco but also the ERC as the official rate setting body have been put on the spot by the audit results of COA. Thus, the hearings scheduled by the ERC could just be used to legitimize the onerous and illegal charges of Meralco.

Annex: Background and salient points of the COA audit report on Meralco

* On Dec. 23, 2009 COA submitted its report to ERC containing an audit of Meralco’s books for 2004 and 2007

* COA audit was based on an SC decision in Dec. 2006 regarding an ERC-approved Meralco rate hike in 2004 under the unbundling of rates; ERC approval was questioned but was upheld by the SC, which at the same time ordered the ERC to ask COA to conduct an audit; COA audit started in Sep. 2008

* COA disallowed various costs in 2004 and 2007 that Meralco used to compute its unbundled rates

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