SC directs energy body to review Meralco's rates to provide 'least cost' electricity
MANILA, Philippines — The Supreme Court ordered the Energy Regulatory Commission to review utility giant Meralco’s asset base to provide the electricity that is of the “least cost” to consumers.
The SC, in a full court session Tuesday, ruled that the ERC’s approval of the unbundled rates of Meralco in 2003 violated “its statutory mandate to approve rates that will provide electricity to consumers ‘in the least cost manner.’”
The SC remanded the case to the ERC and said the commission should determine whether expenses that are not directly related to Meralco’s operation were passed on to consumers. This is to ensure that consumers are given electricity “in the least cost manner,” as held in ERC’s charter.
The SC also said that ERC “failed to properly consider COA’s (Commission on Audit) findings.”
The case stemmed from a petition filed by National Association of Electricity Consumers for Reforms that sought the courts to assail ERC’s approval of Meralco’s unbundled rates in 2003.
NASECORE’s petition
Section 36 of the Electric Power Industry Reform Act of 2001 or the EPIRA law, which took effect on June 26, 2001, held that all electric distribution utilities should file their application for the unbundling of their rates, for ERC’s approval.
On Oct. 30, 2001, Meralco then filed its application for its unbundled rates, appraisal of properties and proposed an increase in rates of P1.1228/kwh.
ERC approved the utility giant's application in 2003.
Acting on petitions, the SC ordered the ERC to request to COA to first conduct an audit of Meralco’s books, records and accounts “relative to its provisionally-approved rate increases and unbundled rates.”
COA submitted its report to ERC in 2009, but the ERC upheld its 2003 decision that approved Meralco’s unbundled rates.
But NASECORE said that the ERC erred when it disregarded COA’s finding on Meralco’s operating expenses which included employees’ pension and other benefits.
The group also raised that COA found that certain properties and equipment amounting to P3.701 billion in 2004 and P3.586 billion in 2007 should not be considered as part of the rate base.
The group, however, lost its case at the Court of Appeals.
The CA ruling
The appellate court held that “there was no reason for the COA in the instant case to use an accounting methodology other than that used by Meralco when it applied for a rate increase.”
It added: “[A] COA audit is not a pre-requisite to rate fixing, and the ERC is not bound to accept and adopt any finding that such a COA audit may come up with.”
NASECORE then elevated its case to the high court.
The SC, in its latest ruling, reiterated that COA is authorized to “examine accounts of public utilities in connection with the fixing of rates of every nature.”
The tribunal added: “MERALCO and other electricity distribution utilities are monopolies that are regulated by the State, particularly on the rates they charge consumers. The same rationale in regulating power acquisition costs by distribution utilities applies to the allowable depreciation of capital assets by distribution utilities in the present case.”
The SC voted on the case on October 8, but the high court’s Public Information Office has yet to release its voting and a copy of the ruling. Senior Associate Justice Antonio Carpio penned the decision.
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Editor's Note: Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in Philstar Global Corp., which runs Philstar.com.
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