An integrity test for the ERC

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Ben D. Kritz

Ben D. Kritz

WITH an announcement in the middle of last month that its prepaid retail electric service (PRES) had been “approved” by the Energy Regulatory Commission (ERC) utility giant Meralco gave hundreds of thousands of electric customers a glimmer of hope that they might soon be able to ease the crushing financial burden of high power costs.

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A petition hastily filed before the ERC this week by the National Association of Electricity Consumers for Reforms (Nasecore), however, seeks to stop Meralco from proceeding, for a couple of very good reasons.

The filing, which is dated April 14, is technically a “Motion for Leave to Intervene,” or in other words, a request to the ERC to allow Nasecore to file a protest against ERC approval of Meralco’s PRES system. The reason the filing has to be put in these terms is that for circumstances it says were largely beyond its control, Nasecore missed the original deadline for comments on Meralco’s PRES application. As a result, the group must first appeal for an exception to that rule.

Be that as it may, the “motion for leave to intervene” still affords Nasecore the opportunity to put its dissent against certain provisions in Meralco’s PRES plan into the official record.
The biggest issue is the proposal by Meralco to slough off its capital expenditure for the PRES system on its customers in the form of a surcharge or an upward adjustment of its distribution rate, which would be universally applied. In effect, even Meralco customers who cannot or otherwise choose not to sign up for the PRES will still be paying for it.
The second issue raised in Nasecore’s petition is the cost and manner of procurement of the Orga meters Meralco intends to use for the PRES system. The petition alleges that Meralco violated the “least cost” principle of the Electric Power Industry Reform Act (Epira) by not conducting a competitive bidding for the meters. Another violation by Meralco, according to the petition, is agreeing to purchase meters that have fewer features but are three times the cost of the Libra meters used for nearly four years by Meralco’s smaller but eminently more successful prepaid electric rival, Xen Energy Systems Inc. (XESI).

As much as I support Nasecore’s efforts to prevent Meralco from running roughshod over its customer base, the group deserves a bit of a scolding. Were the consumer advocates a little more attentive, they could have taken action almost two years ago, when this column first discussed Meralco’s questionable subsidy plan (“Who’s paying for prepaid electricity?

Apparently, you are,” May 9, 2013), or again last year when Meralco began advertising the PRES program to its customers without clear authorization to do so (“Meralco makes its own rules on prepaid electricity,” April 1, 2014). Filing past the deadline for interventions unnecessarily complicates the issue, because it at least temporarily shifts the question from one about the integrity of Meralco’s plan to that about regulatory procedure, and provides the ERC with a convenient reason to avoid rethinking its uncritical acceptance of Meralco’s PRES.

The ERC could simply reject the Nasecore petition out of hand because of the delay in its being filed; while the regulatory agency’s rules allow for some flexibility in enforcing them, they do not compel the ERC to exercise that flexibility. Rejecting Nasecore’s request to intervene in the case, however, would be a grave error on the ERC’s part even though the action would be technically correct.

As the Nasecore petition correctly points out, the ramifications of any decision involving Meralco reach far beyond the company’s franchise area. With more than 5 million customers, Meralco accounts for about 75 percent of Luzon’s energy sales, and about 55 percent of all electricity sold in the Philippines; regulatory decisions for or against Meralco, therefore, tend to be precedent-setting. If the ERC accepts, or at this point, rather, declines to modify its earlier acceptance of Meralco’s PRES, it will instantly lower the standards of cost-effectiveness and reliability established by the XESI system. Worse still, permitting Meralco’s plan to go ahead without challenge further reinforces the very bad habit of passing all costs and risks to consumers, a safety net that encourages slipshod planning and management.

To be clear, no one, not even Nasecore, wants to entirely prevent Meralco from finally launching the PRES program; it is a boon to consumers, particularly the vast majority who lose the greater part of their meager incomes to grossly-inflated electric costs every month.
Watching a giant company with almost unimaginably vast financial and technical resources stumble through the development of a system for four years while a cross-town rival with a staff of fewer than 20 successfully launched PRES in different parts of the country has certainly been entertaining. At the same time, it is discouraging once one realizes that it is Meralco’s consumers who are shouldering the economic burden of the company’s incompetence.

The Nasecore petition is an integrity test for the ERC: Will it follow its mandate to fairly regulate the electric power sector, and force Meralco to change the onerous provisions of its PRES proposal? Or will the ERC instead do what it usually does, and rubber-stamp yet another Meralco application regardless of how stupid or greedy the proposal may be?

ben.kritz@manilatimes.net

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1 Comment

  1. Amnata Pundit on

    Sana you filed it yourself as soon as you discovered the anomaly. Next time, don’t wait because you know that Pinoys are notorious procrastinators.