Congress set to dip a toe into electric rate scandal
AFTER hearing the complaints of electricity consumers about their obnoxiously high bills for May and June, lawmakers led by Deputy Speaker and Camarines Sur Rep. Luis Raymund Villafuerte announced this week they would investigate the “unexplainable surge” in power rates. That news, however, is not as exciting as it sounds at first.
On closer examination, what House Resolution 953 seeks to clarify is not the “unexplainable” part of that surge at all, but rather a little-noticed ruling by the Energy Regulatory Commission (ERC) in February increasing the amount the National Grid Corp. of the Philippines (NGCP) could collect from consumers in the form of transmission charges. While this did contribute to the big increase in electric bills, it was a minor factor, and one that any congressional action short of a comprehensive overhaul of the Electric Power Industry Reform Act of 2001 (Epira) is unlikely to affect.
On February 13, ERC approved a petition from NGCP to raise its maximum allowable revenue (MAR) for 2020 from P43.8 billion to P47.1 billion. NGCP, of course, is the source of the transmission charge that appears on your electric bill every month, and the approval of its MAR increase resulted in an immediate jump from P0.6656 per kilowatt hour on the January bill to P0.7544 per kWh in February. The rate has since increased incrementally to P0.8461 per kWh as of the June billing, or about P0.18 per kWh since the beginning of the year. Unlike distribution charges — the revenue collected by Meralco and other distribution utilities — the transmission charge is at least not progressive. In other words, everyone pays the same rate for NGCP’s transmission services each month, regardless of how much electricity he or she uses.
In gross terms, the bill for an average household using 400 kWh a month has increased by about P37 a month due to transmission charges compared to February, the last billing before the coronavirus pandemic-related lockdowns were imposed. With most people’s bills having increased by two to five times starting in May, taking ERC and NGCP to task for a component of that which amounts to the price of a can of soda hardly seems relevant, especially since there is not actually anything legally improper about the MAR increase.
According to NGCP’s contractual arrangement that allows it to monopolize the entire transmission grid of the Philippines, it is essentially guaranteed a minimum return, or more accurately, a return within an agreed-upon range, the upper limit of which is defined by the MAR. Due to inflation and other increasing cost inputs, the MAR usually needs to be increased from year to year to maintain the range.
This sort of arrangement is enabled by Epira, and is a completely normal feature of almost any public-private contract, especially when it involves utilities. Since it is basically a mathematical formulation, ERC would have been hard put to deny NGCP’s petition; having done so would have very likely landed the government in yet anotaher arbitration case, which it would very likely lose. And at the time the MAR increase was approved by ERC, neither the regulator nor anyone else had any idea the country would be brought to a virtual standstill a month later, so using the pandemic as a force majeure justification for rejecting the MAR increase does not apply.
All things considered, the best that can be said about Congress’ bold announcement of an “investigation” is that it is pointless and disappointing virtue-signaling that completely sidesteps the real source of the shocking increase in electric bills: Meralco’s taking advantage of progressive rate schedules to impose what amounted to a quarantine penalty on almost all of its 6 million-plus customers. The only possible positive outcome with respect to the narrow, fringe issue involving NGCP that Congress has decided should be “fiscalized” is that NGCP might be prevailed upon to voluntarily forego the MAR increase as a compassionate measure. The transmission company, however, is under no legal obligation to do so, and even if it does, the amount of relief it can offer consumers is insignificant.
To its credit, ERC has ordered Meralco to explain its side in the billing controversy, so the regulator is at this point still doing its job. One would think that action would have been
enough of a cue for Congress to do likewise, but on the other hand, it has become almost impossible not to overestimate its commitment to public interest or grasp of current affairs, so we probably should not be surprised that it has found a way to misinterpret the signals.