NR0601: Congress should question Meralco-ERC relationship

Mula sa Tanggapan ni Anakpawis Rep. Crispin Beltran
News Release June 2, 2005
House of Representatives, South Wing Rm 602
931-6615 Ina Alleco R. Silverio,Chief of Staff
Email: paggawa@edsamail.com.ph, anakpawis2003@yahoo.com
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Congress should question Meralco and the ERC's collusion regarding series of rate hikes

Anakpawis Representative Crispin Beltran today said that the House Committee on Energy should summon the executives of Meralco and officials of the Energy Regulatory Commission (ERC) and ask them, once and for all regarding their relationship of coordination and cooperation which are expressed in the smooth approval of Meralco's petitions for rate hikes. Beltran said that the ERC and Meralco have worked out and perfected a system wherein Meralco owners the Lopez business groups get it into their heads to jack rates because they want more funds for their other business ventures, and the ERC gladly and graciously cooperates.

"It's a clear cut case of business opportunism," he said of Meralco's recent rate hike petition. "Even the basis for the rate hike - the financial records, the computations, the technical justifications - is anomalous. This recent rate hike, like its predecessors, is being implemented out of sheer business greed and opportunism."
The veteran labor leader said that Meralco's greed has exceeded all boundaries. "Meralco is literally stealing from its costumers and consumers. Consumers are being made to pay higher rates for services they've already paid for, and Meralco is making them shoulder the costs of its expansion projects and development of other Lopez-owned ventures."

Beltran said that the Napocor and the Power Sector Assets and Liabilities Management (PSALM) Corporation submitted inaccurate accounts of their financial status, the formula for the rate increase, and basic premise for their petition for a rate increase. "The primary reason for the increase was because NPC creditors demanded that the NPC's Return on Rate Base (RORB) be steadily pegged at eight percent. The purchased power adjustment cap was previously pegged at a lower rate of 40 centavos per kilowatt hour, and this meant that the NPC was unable to reach the eight percent RORB. This rate increase should be immediately stopped, and the rates rolled back," he said. On June 22, 2004, Napocor and PSALM filed before the Energy Regulatory Commission (ERC) an application for the approval of a revised RORB with Time-of-Use (TOU) based Generation Charges for Luzon, Visayas and Mindanao Grids, with prayer for provisional authority. The filed petition was accepted by ERC and was numbered ERC Case No. 2004-178.

Before the scheduled hearings, ERC received several letters and pleadings from people's organizations, consumer groups, local government units, distribution utilities and concerned government officials manifesting their comments and opposition to the application filed by the NPC and PSALM. The ERC conducted six hearings from July 31, 2004 to August 31, 2004 in additional to the three hearings conducted by the ERC.

In one of the hearings, PSALM Vice President for Finance Nonito Bernado attested that the Napcor needs to attain an eight percent (8%) RORB to meet its loan covenants. After nine (9) hearings and submission of fifty six (56) comments and position papers on the NPC and PSALM application, ERC issued on September 3, 2004 an order granting provisional authority to implement an average of Php 0.9798/kWh adjustment in NPC power rates which commenced on September 26, '04. The ERC authorized NPC to provisionally impose Php 3.8054, Php 3.0374 and Php 2.0700 average basic generation charges for Luzon, Visayas and Mindanao respectively .

Many oppositors filed their respective motions for reconsideration of the aforementioned order. Different legislative bodies of various local government units also passed several resolutions manifesting their objections. "The ERC, however, denied the said motions for reconsideration supposedly for lack of merit. The ERC did not even bat an eyelash when it waved out all protests to the rate hike petition, regardless of the fact that the protests had very strong grounds," he said.

Beltran said that the NPC has been unable to present justified, reasonable and believabale arguments for a rate hike. The NPC was ordered to prove the following: (1) revenue requirements of the NPC should include costs incurred on plants it operated after the termination of its Build Operate Transfer (BOT) contracts with Independent Power Producers (IPPs); (2) the rationale for NPC's bad debts; (3) the loss on foreign exchange (FOREX) fluctuations should form part of the revenue requirement to rebase said component of the generation rate as of CY 2002; and (4) there are several completed projects that should be included in the calculation of NPC's rate base;

"It was found out immediately after that (1) certain assets included in NPC's rate base were not eligible for inclusion among the reason to justify the rate hike; and (2) that the mismanagement of the assets and the inefficiencies of the NPC were the causes of losses incurred by it. There have also been assertions from the Commission on Audit pointing out more anomalies," he said. "The assets presented by the Napocor were also appraised by an independent company, and it was proven that the contention that the values of the assets presented by the applicants may not be used as fair bases for fixing the rates."

Beltran said that during the March 1, 2005 hearing , Director Jaime P. Naranjo of the COA proved the following points: (1) that NPC has not submitted to the ERC a reliable listing of the assets proposed for inclusion in the rate base; (2) that the values stated by the applicants in their evidence are unreliable and there is a need for an appraisal by an independent appraisal company of the said assets; and (3) that the expenses of NPC were attended by management inefficiencies.

"Despite all this, the ERC was single-minded in its determination to give the Napocor what it wanted. It ignored the contentions made by the oppositors of ERC Case No. 2004-178, and on April 13, 2005 granted an average of Php 1.0354/kWh increase in Napocor power rates. Such a decision is unjust and unwarranted as proven by the petition and position papers submitted by oppositors, different local government units, concerned government officials, consumer groups and people's organizations. Congress should intervene and speak up against the implementation of the Napocor and PSALM's power rate adjustment. The ERC's process of deliberations are also highly questionable and one-sided in favor of the petitioners. It's long overdue that the ERC be investigated for its apparent bias for the Napocor, Meralco and the independent power producers," he concluded.#