SC voids ERC approval of Meralco unbundled rates

MANILA, Philippines — The Supreme Court (SC) has voided the Energy Regulatory Commission (ERC)’s approval of the unbundled rates of the Manila Electric Co. (Meralco).

Senior Associate Justice Antonio Carpio penned the decision released during full session on Tuesday.

The Court held that ERC’s order was in violation of its statutory mandate to approve rates that will provide electricity to consumers at the least cost.

Thus, it remanded to ERC the case for determination of a reasonable and fair valuation of the regulatory asset base that will provide electricity to consumers “in the least cost manner,” the high court said in a statement. Nullified were ERC orders issued on June 21, 2011 and Feb. 4, 2013.

The case stemmed from the petition for review filed by the National Association of Electricity Consumers for Reforms Inc. (NASECORE) of Court of Appeals (CA) decision and resolution dated Feb. 29, 2016 and Aug. 18, 2016 that affirmed the two ERC orders.

“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 said in its decision.

Based on a summary provided by the SC on the case, the ERC in its 2011 order affirmed the findings and conclusion in its March 20, 2003 decision and May 20, 2003 order, and declared Meralco’s approved unbundled rates final.

The ERC cited wrongful assumptions in the Commission on Audit (COA)’s findings of “excess revenues” or “over-recovery” on the part of Meralco.

The ERC also found that COA’s calculation of Meralco’s revenues based on historical costs of assets and a 12 percent rate-of-return is contrary to existing laws and jurisprudence, which allows the use of present market value in fixing the rates to be applied prospectively as well as weighted average cost of capital in determining a reasonable return the utility is entitled to.

The ERC likewise found that COA’s calculation cannot be adopted because it failed to take into account that revenues for 2000 should not be compared to revenues for 2004 and 2007.

Nasecore’s motion for reconsideration was denied for lack of merit by the ERC in 2013 and later by the CA.

The CA held that a COA audit was not a requisite for ERC’s exercise of its rate-fixing powers, and that the ERC was not bound to accept or adopt any finding of COA.

“In partially granting the petition, the SC found that the ERC failed to properly consider COA’s findings as well as to comply with its statutory mandate to approve a rate that provides electricity to consumers ‘in the least cost manner’ as expressly provided in ERC’s charter,” the SC said in the statement.