SC: ERC order on 2013 Meralco rates was to ‘protect consumers’

THE Supreme Court (SC) has affirmed the order of the Energy Regulatory Commission (ERC) approving the request by the Manila Electric Co. (Meralco) for a staggered collection of automatic rate adjustments arising from generation costs for November 2013.

In a 32-page decision penned by Associate Justice Jhosep Y. Lopez, the Court en banc held that the ERC’S decision to allow the staggered recovery of the adjustment charges while denying Meralco’s request for carrying costs was intended “to protect the interest of the consumers.”

“States otherwise, the actions of the ERC were in accordance with the law and the rules, and results in a protection of the consumers who did not have to pay the adjustment rates in one bill,” the SC declared.

“Accordingly, there can be no basis to ascribe grave abuse of discretion to the act of the ERC in issuing the December 9, 2013, letter-approval since all it did was to follow existing guidelines on the imposition of the generation rate,” it added.

In a letter dated December 5, 2013, Meralco informed respondent ERC that the total cost of generation to be passed on to its almost-5 million captive customers amounted to P22.64 billion, equivalent to a generation charge for December 2013 billing of P9.1070 per kilowatt-hour (kwh). This is an increase of P3.44 per kwh from the P5.67 per kwh that was billed in the previous month.

Petitions consolidated

MER ALCO attributed the abrupt increase in the generation cost to the supposed maintenance shutdown of the Malampaya facility. This facility supplies natural gas to three major power plants—ilijan, San Lorenzo and Santa Rita—that, in turn, supply an aggregate capacity of 2700-megawatt (MW) electricity to franchise areas.

Meralco further said that the shutdown of Malampaya coincided with the scheduled maintenance of two other plants—pagbilao 2 and Sual 1—that also collectively contribute over 950 MW to its requirements.

The company said because of the events, it was forced to buy expensive power from the Wholesale Electricity Spot Market.

It also cited Section 2, Article II, of the “Guidelines for the Automatic Adjustment of Generation Rate and System Loss Rates by Distribution Utilities” (Agra Rules) in asserting that it was authorized to automatically ref lect the full generation cost of P22.64 billion in its December 2013 billing to its customers.

On December 9, 2013, respondent ERC approved Meralco’s request for a staggered collection but did not approve the power firm’s request to recover carrying costs.

Theerc’sapprovalofthestaggered imposition of the generation charge promptedthefilingofseveralpetitions that the Court ordered consolidated.

The petitioners include representatives from Party-list groups such as Bayan Muna, Gabriela Women’s Party, ACT Teachers Party-list and Kabataan Party-list, National Association of Electricity Consumers for Reforms, Federation of Village Associations and Federation of Las Pinas Homeowners Association.

Arguments vs ERC Ok

NAMED as respondents were the ERC, Meralco and the Philippine Electricity Market Corp. and power generation companies such as First Gas Power Corp., South Premiere Power Corp., San Miguel Energy Corp., Masinloc Power Partners Co. Ltd. and several others.

In assailing the legality of the rate increase, the petitioners argued that the ERC committed grave abuse of discretion in approving Meralco’s proposal to pass on to consumers the increase in generation cost without complying with requirements.

The groups noted that the proposal was approved without the conduct of a public hearing as required in the implementing rules and regulation of the Electric Power Industry Reform Act (Epira) or Republic Act 9136. They added that ERC’S approval of Meralco’s proposal to pass on to consumers the increase in the generation cost for November 2013 violates the Epira law.

According to the petitioners, Section 43 of RA 9136 mandates the ERC to promote competition and penalize abuse of market power in the restructured electricity industry.

They argued that the right of customers for due process has been violated when Meralco started increasing its rates without notice and public hearing. The petitioners added that no publication or public advisory in major publications of the rate increases.

In accordance with rules

IN dismissing the petitions, the SC held that ERC’S actions were in accordance with the provisions of the Epira and Agra Rules.

It noted that Section 43(k) of the Epira gives the ERC the power to monitor and take measures to penalize market power, cartelization and anti-competitive or discriminatory behavior of any participant in the energy industry.

“There is no dispute that this power, as well as all the other powers given to the ERC as a regulator, allows the ERC to review, confirm and verify the costs as imposed by Meralco,” the SC noted.

On the other hand, Section 1, Article VIII of the Agra Rules gives the ERC the power and discretion to allow an exemption from the Agra mechanism, the High Tribunal said.

“Considering that the ERC has not been shown to have violated any law or issuance in the December 9, 2013, letter-approval, a finding of grave abuse of discretion has therefore no leg to stand on,” the SC ruled. “Accordingly, declaring as null and void the ERC’S December 9, 2013 letter-approval for having been issued with grave abuse of discretion is clearly not warranted.”