PLUG POWER RATE HIKE LOOPHOLE

Philippine Daily Inquirer
First Posted 20:19:00 01/01/2010

BOTH THE MANILA ELECTRIC Company (Meralco) and the National Grid Corp. of the Philippines (NGCP) recently filed before the Energy Regulatory Commission (ERC) a petition for power rate increases. If consumers just sit back in submission, they can brace themselves for another round of power rate increases in 2010.

In April 2009, the ERC, in a consolidated resolution, approved an increase of P0.267/kWh or a new rate of P1.227/kWh for Meralco (ERC Case Nos. 2008-004RC and 2008-018RC) from its former average price of P0.96/kWh. However, the National Association of Electricity Consumers for Reforms (Nasecore) questioned this ERC decision in a Petition for Review filed with the Court of Appeals (CA-GR SP No. 108663).

In another petition (ERC Case No. 2009-057RC), Meralco seeks an increase of P0.2647/kWh under its proposed Maximum Average Price (MAP) of P1.4917/kWh for the year 2010 and its translation into a distribution rate structure for its various customer classes.

With sales of 27 billion kWh in 2008, this would give Meralco an additional yearly revenue of about P7.2 billion. If its current application is also approved, the ensuing new power rate increase would give Meralco a total additional revenue of P14.4 billion every year under the Performance-Based Regulation (PBR) Methodology.

Similarly, the NGCP applications are for the approval of its Maximum Allowable Revenue (MAR) for calendar year 2010 (ERC Case No. 2009-160RC) and of its Maximum Allowable Revenue for the Third Regulatory Period covering 2011-2015 (ERC Case No. 2009-180RC).

All these applications are under the rate setting methodology called PBR, which replaced the Return On Rate Base (RORB), and has been adopted by Transco/NGCP and the private distribution utilities (PDUs). They all invoke Sec. 43 (f) of the Electric Power Industry Reform Act, a part of which says, “The ERC may adopt alternative forms of internationally accepted rate setting methodology as it may deem appropriate.”

However, the same section also provides that, “[t]he rates must be such as to allow the recovery of just and reasonable costs and a reasonable return on rate base (RORB) to enable the entity to operate viably.”

Surprisingly, none of the applicants when they filed their initial application under PBR made any allegation that their respective operation was no longer viable, or that their rates at the time of the application no longer allowed them to recover just and reasonable costs and RORB, yet the ERC approved the initial applications.

Nasecore strongly believes that the discussions and decision of the ERC on these applications must revolve around this particular provision of the Epira and on nothing else. Failure to do so would all the more lead consumers to believe that in the Philippines, there is a regulatory failure in the power sector.

PETE L. ILAGAN
President,
National Association of Electricity Consumers for Reforms (NASECORE)
Email: nasecore@nasecore.org

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