CROSSINGS By BUTCH L. JUNIA BILLIONS in MERALCO OVERCHARGES Meralco is getting away with illegal, unjust and excessive rates because the Energy Regulatory Commission (ERC) is not doing its job, according to Mang Naro Lualhati. He is not giving Meralco any quarter, as he filed with ERC on April 11, 2011 another petition “for (a Meralco) refund of overpriced/overcharged capital expenditures of P31.039 Billion in 2008-2011.” At Meralco’s annual sales of 30 billion kilowatt hours, that represents a refund of P1.10 pkwh, a very steep and significant rebate compared to the pittance trumpeted by Meralco in today’s papers – the P0.0313 drop in generation charge, or 3.1% of the total amount we are entitled to under the Lualhati refund! In a yet unnumbered Petition filed last month by Mang Naro, he questioned the supposed capital expense or capex of Meralco from 2008 to 2011, amounting to P31.039 Billion, as claimed in Meralco’s current application for approval of its Annual Revenue Requirements (ARR) for 2012 to 2015, under the highly-oppressive and grossly-disadvantageous Performance Based Regulation (PBR) conjured by ERC to guarantee gargantuan profits for utilities. Note that these amounts cited by Mang Naro are based on supposedly “actual” capital expenses. I use the word “supposedly” because ERC has not done any actual audit or verification of those expenses, relying instead on a foreign consultant that we are paying for, a so-called “rate reset expert” for whose services we have been billed – or bilked, depending on how you look at it – the grand amount of P208.66 Million over three (3) years, from 2008 to 2010. Worst yet, the Commission on Audit (COA) has been dropped by ERC as its regulatory arm, preferring instead the expensive foreign firms and in fact ignoring the findings of COA. Pending before ERC since December, 2009, is a COA audit report showing Meralco overcharges amounting to as much as P14 Billion for two test years only – 2004 and 2007. COA checked the claimed equipment, plants and assets of Meralco, resulting in such significant findings as the excluded parking lot and helipad, disallowed employee retirement and benefit program that ran into billions of pesos, advertising expenses, even the so-called Special PCIB Account that had been disallowed in many COA audits in the past. By the way, Meralco says in their announcement of the slight change in generation charges that this is a pass-through cost where no income is made by the utility. In the COA audit that ERC has swept under the rug for over two (2) years now, Meralco over collected in generation charges for 2007 by as much as P2.7 Billion. If only ERC will do its job and report out the COA findings, we will know what is the real score with Meralco, and of course, with ERC itself. That audit was ordered by the Supreme Court itself, after it ruled in favor of a Meralco increase, provided a COA audit was done and a refund made when there are exclusions or disallowances. The P14 Billion exclusions and disallowances by COA have to be ruled upon by ERC, so we will know whether they are heroes or heels. But they have stonewalled on that report, and it is time to smoke them out with the appropriate action in another forum. Consumers raised the COA report as a prejudicial question in the ARR application of Meralco for the 3rd regulatory period (ERC Case No. 2010-069 RC) but ERC just swept the consumer protest under the rug. Yesterday, we talked to lawyer Bono Adaza, and he has committed to help us bring all these cases to a more objective and fairer forum, and to hold the Commissioners accountable for their actions (or lack of it) and decisions. We will also challenge PBR itself, no longer at the ERC but in a judicial and/or legislative process where the ERC must explain and answer for all the troubles and consumer woes brought about by the version of PBR. PBR as a concept and as a rate regulatory regime to promote efficiency and the sharing of efficiency gains is laudable. But the way we have implemented it here, all the gains have been to the utility, at the expense of the captive customers and consumers, with no perceptible efficiency gains. To go back to Mang Naro’s refund petition based on excessive claims on capex, in the ERC Draft Determination of Meralco’s application, capital expenditure is “to be based on the economically efficient capital expenditure requirements to meet the forecast demand. Economic efficiency of the forecasts should be assured.” That is a direct quote from page 28 of the Draft Determination, one that was made by ERC under signature of Zenaida G. Cruz-Ducut, Chairperson; Alejandro Z. Barin, Commissioner; Maria Teresa A.R. Castaneda, Commissioner; and, Jose c. Reyes, Commissioner. On official travel was Rauf A. Tan, Commissioner, thus he had no signature. Since this covered the second regulatory period, Mang Naro plotted actual increase in demand – an annual rate of 781 Gwh, with the highest spike posted in 2009 to 2010 at 2,039 Gwh. The lowest was in 2008 to 2009, at 332 Gwh. What was the capex claimed by Meralco? For 2008, P6.61 B; 2009, P7.824 B; 2010, P8.63 B; 2011, P7.955 B. Mnag Naro figured out that based on annual increase in demand by 781 Gwh, the capex of Meralco per year should only be P195 Million, to answer for the 781 million or 0.781 billion KWH additional sales, not the P6B, P7B or P8B ERC allowed Meralco. To allow the ERC’s very tolerant attitude to Meralco would perpetuate a ridiculous situation where the capital cast for the new demand served is far in excess of the market value of the electricity delivered. Take the case of the year 2008 to 2009, where the increase in demand is only 332 Gwh, based on actual report of Meralco to ERC. The effective capex cost, given the volume and the claimed expense of P7.834 Billion, is P4.237 pkwh. At that time, distribution charge was P1.4747 pkwh, so that consumers were subsidizing the capex by P2.7623 pkwh. In other words, for every kwh Meralco sold, they were charging us an extra P2.7623, because ERC was sleeping on the job. Where now is the “economically efficient capital expenditure” criteria ERC boldly and brashly proclaims in its Draft Determination? What manner of business can make that kind of investment, knowing full well that it will lose and lose big, for every item of sale? And what is the biggest tragedy here? At the hearing on Meralco’s 3rd regulatory period application, an expert Meralco witness, a Mr. Emerton from Asian Appraisal, admitted to Mang Naro Lualhati that current Meralco assets – about P155 Billion of regulatory asset base – is only 50% utilized. More of this in my next column.
Posted on: Fri, 14 Jun 2013 06:31:19 +0000