OpinYon No. 24, January 31, 2011




                                                      PBR: PARUSA Sa BAYAN RATES 

Mang Naro Lualhati has asked anew the Energy Regulatory Commission (ERC) to dismiss and deny Meralco’s latest petition for another round of four-year annualized increases in its distribution rates “for lack of merit and (for being a) filing in bad faith.”

Mang Naro said Meralco’s application under ERC Case No. 2010-069 RC, “for approval of the annual revenue requirement and performance incentive scheme for the third regulatory period (2012-2015)… is illegal because it is based on the illegal 15.50% Performance Based Rate (PBR) rate setting method that inflated the return (of Meralco) by 29.16% in violation of RA 9136 (the Electric Power Industry Reform Act) which states as a national policy that: Distribution utilities should deliver electricity in the Least Cost Manner and the Commission should ensure to protect consumers from utility abuse.”

Under Meralco’s present application, its rates would go as high as P1.90 pkwh for distribution charges alone, a rate that was barely P0.76 pkwh when rates were set based on Return on Rate Base or RORB.

The last increase under PBR was given earlier this month, when ERC authorized Meralco to increase its distribution rates from P1.47 pkwh to P1.6464 pkwh, surely a factor in making our rates among the highest in Asia and the world at 28 US Cents pkwh.

That increase was the last installment in the PBR four-year round of annual increases under the second regulatory period, which Meralco seeks to reprise under the so-called third regulatory period of PBR.

Also, thanks to PBR or the Parusa sa Bayan Rates, Meralco reported net earnings of One Billion Pesos Per Month, or P12Billion for 2010, more than double its earnings in 2009, which in turn was more than double its earnings for 2008.

 In a world besieged by contractions in global finance, Meralco experienced anemic market expansion but posted exponential growth in earnings. Meralco’s captive customers, on the other hand, suffered one of the highest rates in Asia and the world.

In Mang Naro’s own words, here is why the ERC should throw out the Meralco application: “In compliance with the Notice dated 15 December 2010 the undersigned (Genaro Lualhati) respectfully submits this comment and prays to this Hon. (sic) Commission to desist from holding public consultations on its own DRAFT DETERMINATION (DRAFT) for the 3rd Regulatory Period from 2012-2015 and instead to DENY and DISMISS the instant application outright on the following grounds – 1. The DRAFT is ILLEGAL and UNJUST, 2. The DRAFT finding of gross overcharges proves the application is filed in bad faith with DOCTORED OVERSTATEMENTS.”

“The DRAFT is illegal because like the application it is based in the illegal 15.50% Performance Based Rate (PBR) rate setting method that inflated the return by 29.16% …..”

“And the DRAFT’S findings of overstatements are solid facts/evidence that it is Doctored, violating Rules of the Commission. Since the DRAFT was issued after hearings on the application had already been held and Meralco had rested its case; showing gross overcharges. (sic) Instead of issuing out a DRAFT revising the overcharge the Commission should have immediately issued out its Decision/Resolution DENYING and THROWING out this DOCTORED APPLICATION”, Mang Naro said.

Mang Naro goes on to show Meralco’s alleged overcharges and the Commission’s revisions totaling P92.8 Billion,  consisting of P43.072 Billion for “ARR OVERCHARGE”, P34.921 Billion for “RETURN OVERCHARGE”, and P14.859  Billion for “OPEX OVERCHARGE”, all for the 4-year period.

“Additionally,’ Mang Naro says further, ‘the DRAFT did not consider the following anomalies reported during the hearings showing ERC bias in favor of Meralco, to wit: 1. The Meralco assets are 50% utilized as declared in witness stand Mr. Emerton an AACI Expert; 2. Meralco power transformers are 73%-151% overpriced reported by Mr.Uriel G. Borja (Amendment of Manifestation with dated November 22, 2010); 3. The unresolved PBR ERC CASE NO. 2010-034 MC that illegally inflated return by 29.16%; 4. Meralco filed two (2) doctored RAB values – revised even higher by ERC to favor Meralco, shown below – original Meralco application P155.241 Billion, Meralco Supplementary P119.21 Billion, DRAFT (revision) P125.989 Billion.”

The ERC CAPEX is overstated, according to Mang Naro.

We quote Mang Naro again: “Meralco declared its CAPEX at P42.205 Billion. The ERC Draft revised it down at P34.772.  But a closer look shows that both forecasts are excessive. The correct CAPEX is P1.095 Billion because in 2012-2015, Meralco’s forecasted additional energy consumption from 2011 is only 4.462 Gwh – making the Meralco application and the ERC draft illogical and excessive.”

Based on Mang Naro’s analysis of Meralco’s submissions, the projected energy consumption for 2011 is 28.8 Billion kwh, with a CAPEX  of P7.206 Billion. From those numbers, he says, the CAPEX per Gwh is P0.250 Billion, reckoning at P7.2 Billion for 28.8 Billion kwh consumption.

Tracking consumption growth to 33.190 Billion kwh by 2015 from 29.864 Billion kwh in 2012 as the base year,  the growth is about 4.362 Billion kwh, and applying the CAPEX cost of P0.250 Billion for 1 Billion kwh increase in consumption, the total CAPEX, according to Mang naro, should only be P1.095 Billion, not P45.2 Billion according to the Meralco application nor P34.772 Billion based on the ERC DRAFT.

In either case, if Mang Naro’s point is again ignored by ERC, the additional burden to the consumers will be P44 Billion or P33 Billion, another huge and fantastic windfall for Meralco.

Let us join Mang Naro Lualhati at the so-called public consultation on February 7, 2011, 9:00 am at the ERC hearing room, 15th floor, Pacific center, Ortigas Pasig City, so  ERC will know that the public looks over its shoulder and demands just and reasonable judgments from them.


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