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Killing us

Monday, July 2, 2012

Killing us

The Energy Regulatory Commission (ERC) has again approved new rates for Meralco for the regulatory year starting July 1, 2012 to June 30, 2013 on the strength of only a PA (provisional authority) given before some pending issues are resolved. The latest provisional authority is being issued on top of several previous PAs for 2010, 2011 and 2012. Lualhati has pending, unresolved petitions insisting the MAP (maximum average price) of Meralco should only be P 0.90/kwh against ERC approved rates ranging in and around P 1.60/kwh (now being raised to P 1.6303/kwh), Borja has produced evidence of overprice of up to 900 percent of Meralco costs used as its basis for applying for rates with ERC, and both of these are already brought to the Courts to resolve yet ERC continues to issue PAs. What is the urgency of issuing rate increase for Meralco using the PAs when Meralco has continued to reflect annual increases in profits since 2006 through to the current year.

Last February 2012 it was announced that “’Meralco profit surges 40 percent’ … Meralco said core net income, which strips out currency and derivatives-related items, climbed 22 percent to P14.9 billion from a year ago. It exceeded the profit guidance of P14.5 billion.… Meralco, which is indirectly controlled by Hong Kong-based First Pacific Co. Ltd. and partly owned by San Miguel Corp., …had 5.3 million customers last year, up 3.7 percent from a year ago.” Meralco claims its profits rose due to increased number of customers, but a 40 percent increase in profits cannot be solely from a 3.7 percent increase in customer base that its own media statements claims. That increase in profit is from simply from the price gouging rates ERC has been giving “provisional increases” to Meralco over at least the past three regulatory years.

From a recent letter of our colleague Butch Junia: “Meralco’s net earnings have soared year on year : P3.1 billion in 2008; P6.3 billion in 2009; P10.1 billion in 2010; P14.8 billion in 2011. For the year 2010, customer base grew three percent; sales increased 11 percent, but, earnings soared 67 percent — which obviously came from rate increases rather than market growth or operational efficiencies: best for the utility, hardly good for the public.”

With such profits, what is the urgency of granting PA’s for rate increase to Meralco? And such profit surges are only possible with the massive overpricing of Meralco costs, such as 500 percent on the tens of thousands of power transformers, 900 percent  on electric poles, and similarly overpriced sub-stations, contractors, ad nausea. At the heart of the abuse, however, is an ERC decision that blatantly defies a 20004 Supreme Court under CJ Reynato Puno affirming the 12 percent RoRB as the legal and just basis for setting power rates. As Junia recaps:

“Shortly after that (SC) decision, the ERC started the shift from Return on Rate Base (RoRB) to Performance Based Regulation (PBR) with the adoption of rate unbundling in 2003, and full PBR in 2007. Under RoRB, the distribution, supply and metering charge of Meralco was P0.70/kwh; under rate unbundling it was P0.90/kwh. With PBR, it was P1.2227/kwh in 2009, P1.491 in 2010, P1.6464 in 2011, P1.60 in 2012, to go up to P1.633 in July 2012-June 2013.” The PBR rate raises the return-on-rate base to over 15 percent but that is not all, the ERC also provided incentives that added on pushed DU returns to as high as 17 percent. But these are not the only problems residential consumers have, but are rarely told, with the present power rates system.

As Junia writes in his letter, “…The Energy Regulatory Commission (ERC) is mandated by the Electric Power Industry Reform Act (Epira) to ‘… ensure (for consumers) a reasonable price of electricity. The rates prescribed shall be non-discriminatory,’” yet we see in Meralco’s petition:

“For distribution charges Meralco wanted an increase to P1.962/kWh from P1.078/kWh for residential consumers using up to 200 kWh, P1.5535/kWh from P1.3851/kWh for those consuming 201-300 kWh, P1.5535/kWh from P1.3851/kWh for consumers of 301-400 kWh and P2.4780/kWh from P2.3096/kWh for those that use over 400 kWh per month. Industrial users, meanwhile, with a minimum demand of 40 kW to less than 200 kW would have their supply charges raised to P990 from the current P910 under the Meralco petition. Large industrial users that consume 200 kW to less than 750 kW will pay supply charges of P4,110 while industrial users of 750 kW to less than 10,000 kW have to pay P14,920, the firm said.”

Note: Up to 10,000kW industrial users pay P1.49/kW but residential consumers using 201kWh to 400kWh pay P1/55/kWh to P 2.30/kWh; industrial and commercial power consumers using even higher kWhs, such as shopping mall which go into millions of kWhs, can pay as long as P 0.20/kWh distribution charge.

Residential power users consume roughly 35 percent of Meralco power but provide around 65 percent of Meralco’s revenues, inversely proportional to industrial/commercial power users. Residential consumers subsidize everyone else. Soon the “open access” policy will soon push even higher rates for residential consumers as Meralco and DUs court industrial/commercial consumers with lower rates to prevent them from setting up their own power plants. Meanwhile, “Shares of Meralco closed at P253.40 on Friday, up 0.96 percent from its previous close of P251 apiece,” as the national economy suffers as exemplified by the recent statement of Businessman Robert Go, director of the Philippine Retailers Association and chairman of the Economic Development Committee of the Regional Development Council, “Because of this big power expenses, most of the profit of businessmen in the past year was wiped out and if this will continue, the workers will be affected because their employer can hardly adjust wages.”

The power oligarchs are killing everyone of us.

(Watch Destiny Cable GNN’s HTL edition of Talk News TV, Saturdays, 8:15 to 9 p.m., with replay at 11:15 p.m., this week senatorial candidate Joey de Venecia;  visit http://newkatipunero.blogspot.com)

(May pahintulot ng pagsipi at muling paglimbag dito mula kay Ka Mentong)

SourceThe Daily Tribune

URL: http://www.tribune.net.ph/index.php/commentary/item/965-killing-us

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