Electric companies’ P20-B highway robbery thwarted

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There were two big news stories in the past two days affecting the lives of millions of Filipinos in Metro Manila and adjacent towns, but which, surprisingly or unsurprisingly, were buried in the inside pages of mainstream newspapers and reported only as in-the-meantime items. Except for this paper, that is. It bannered this news, for which I’m proud to be part of it.

The Energy Regulatory Commission has stopped the Manila Electric Company’s (Meralco) attempt in December and January to overcharge consumers by P20 billion.

Stung by public outrage that it wasn’t doing its job in protecting electricity consumers, the ERC last week ordered the Philippine Electricity Market Corp. (PEMC) that runs the wholesale Electricity Spot Market (WESM) to find out if Meralco’s claims of the high costs of electricity it bought at that market were correct.

Meralco had claimed that the steep rises of its rates for December and January were due respectively to the P33 per kilowatt-hour and P36/kWh price of the electricity it bought from the WESM in November and December.


False prices, PEMC president Melinda Ocampo reported Tuesday, because the power producers violated market rules, resulting in a colossal market failure. (See for clarification my January 5, 2014 column “USAID study: Electricity ‘spot market’ a farce.”)

Ocampo reported that her firm’s investigation showed that the WESM average price should be P6 per kilowatt-hour for November 2013, and P6.24/kWh in December—shockingly less than one-fifth of what Meralco claimed were the prices it paid for.

Meralco’s profits zoomed up in 2009, when the Indonesian tycoon Anthoni Salim’s firms took control of it.

Meralco’s profits zoomed up in 2009, when the Indonesian tycoon Anthoni Salim’s firms took control of it.

(The WESM is the market in which companies are required to offer the power they produce, from which Meralco and other electricity-distribution firms purchase the electricity they need whenever the generator firms with which they have long-term supply contracts are unable to provide them with the power consumers need. )

Energy Secretary Carlos Petilla on Tuesday also pointed out: “The recalculated rates (of WESM) show a big gap.” And, “The (real) rate is a little over P6 per kWh. It’s an average price for both months. Compared to November and December, it’s a big drop,” said Petilla, who also chairs the PEMC.

This means the WESM power it bought in November should have cost Meralco not the P9.5 billion it reported, but just P2.1 billion, for a difference of P7.4 billion. For December, it cost Meralco not P12.3 billion that it claimed, but only P2.1 billion–a discrepancy of P10.2 billion.

The sum of the discrepancies of the two months is a staggering P20 billion.

An Oxford dictionary defines the idiom “highway robbery” as “the fact of someone charging too much money for something.” That’s a good definition as any for what Meralco and the power generators it bought from attempted to do.

This P20 billion cost would have been passed on in December and January to its captive market, the 10 million residents of metropolitan Manila and adjacent provinces, had the Supreme Court not stopped it in response to petitions claiming the rate hikes were illegal. The Supreme Court action, together with exposes by the independent press on the issue, drove the Energy Regulatory Commission and the PEMC to investigate Meralco’s pricing, especially the costs of its purchases from WESM.

Based on the more accurate WESM prices, the ERC yesterday ordered that Meralco adopt the more accurate rates. It should be P5.9/kwh for December, not the P9.1/kwh Meralco had claimed last year, and for January, P6.1/kwh, not P10.2/kwh.

Those false prices mean huge amounts for a consumer. If you consume 400 kilowatts per month, the more accurate computation would cut your bill by roughly P1,280 for December and P1,640 in January.

The necessity to report and explain the issues using per-kilowatt hour figures conceals the suffering — yes the suffering — inflicted by Meralco’s high rates on Filipinos, who have no choice but to get their electricity from Meralco.

A worker would have paid P1,820 for the 200 kilowatt hours he consumed in December, based on Meralco’s original billing. Under the more accurate bill ordered by the ERC, he would pay only P1,180 — P640 less, a boon that he he would use to buy more nourishing food for his malnourished family.

Try visiting a Meralco frontline office: It’s usually crowded as wageworkers and the poor try to beat the deadline to pay their bills. I’ve even seen poor folks begging, crying for more time to pay, and for the lineman to reconnect their electricity.

The P33/kWh and P36/kWh price at which Meralco bought from the market were the highest in WESM prices since July 2007, when it became fully operational. From that date to October 2013, WESM prices averaged only P7.8 percent, which would give the generators reasonable profit.

However , WESM average prices spiked in the 2012 months of March (P16.3/kWh), June (P20.7), and July (P14.7/kWh). These rate spikes however were not noticed at all, since no one complained against these by filing a suit at the Supreme Court.

The very valid question therefore arises: Were these spikes also unreasonable and due to market failures? Shouldn’t the ERC also investigate these to find out if consumers were actually fleeced by Meralco’s rates, pushed up by these “market prices”?

Discovering now that WESM prices in the last two months of last year were wrong, the ERC should fulfill its mandate for protecting consumes by investigating how Meralco’s profits have been zoomed up since 2009, the Indonesian Anthoni Salim’s firms became Meralco’s controlling stockholders. (See table, and also my column Jan.12, “Meralco’s been raking it in: Why?”)

Is this due to Meralco’s efficiency, to the skill of its new management, especially the purported management genius, its CEO Manuel Pangilinan?

Or is it due to ERC’s failures by allowing the utility company to raise its rates every year, a case of what has been called in economic literature as “regulatory capture”?

Indeed, Indonesian-owned First Pacific Co., Ltd that effectively controls Meralco reported in its 2011 annual report that Meralco’s core income rose to $344 million that year (from $270 million) “due largely to higher tariffs.” In 2012 when its core EBITDA* margin fell, the firm’s report said it reflected “a decrease in (Meralco’s) distribution charge.” (*EBITDA: Earnings before interest payments, taxes, depreciation and amortization.)

What I find outrageous is that even as we have been suffering higher electricity rates since the Indonesian tycoon took over Meralco, his corporate vehicle First Pacific, right after it gained control of Meralco, has jacked up its dividends from it, totaling $128 million from 2009 to 2012.

I’m afraid we’ve lost the capacity to be outraged.

tiglao.manilatimes@gmail.com
www.trigger.ph and www.rigobertotiglao.com

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11 Comments

  1. It is very clear Meralco is guilty of gross manipulation of power prices. If this act is a violation of any government regulation, then Meralco should be penalized to the max, eg revocation of its business license or dismissal of all members of the board of directors. I believe this what the PHL get for allowing foreigners control our basic industries like power generation and distribution and the like.

  2. Zero credit goes to Pnoy, Petilla and their cabal. Public outrage exposed their cozy relationship with big business at the espense of the citizens. Didn’t Malacanang say they were powerless to dictate energy prices? Do the job you all salivate for or get out of the way!

  3. I suggest that the investigation be made for a minimum of five years. Whatever Meralco has over-charged, should be refunded. There must be a way to ensure that the actual costs could be made available on-line by WESM, to keep MERALCO prices in check and not over-priced.

  4. Gabriel Oasan on

    ERC, are you suppose to be a passive or proactive agency? Kailangan pa bang may mag-ingay bago kayo kumilos? Galaw-galaw naman pag may time. Hiyang-hiya naman ako sa inyo!

  5. Kababayan we should rise ans protest any increase in Meralco. Maynilad, rice, celphone load etc. all these bosses are thieves. All should unite to file criminal caes against them. They are conniving each other to rob the consumers.” MGA KAWATANS!”

  6. Ang pagbaba sa tamang presyo ng ating kuryente ay nakasalalay sa honest to goodness implementation ng ating gobyerno ng ating mga batas sa electicity. Huwag na nating isisi ang pagtaas ng presyo sa Meralco at iba pang power producers dahil hindi nito magagawa ang bastang pagtaas ng presyo ng electicity ng walang basbas ng gobyerno. Nakakapanggigil na masabihan tayo ng ating gobyerno na wala silang magagawa sa pagtaas ng presyo ng electricity gayung sila ang binigyan ng ating batas ng kapangyarihan upang masiguro na tama at hindi labis ang pagsingil ng Meralco at mga power producers sa konsumo ng kuryente ng ating mamamayan. Ito ba talaga ang sinasabi na “tuwid na daan”? Medyo yata lumalabas na ang “tuwid na daan” ay ampaw lamang.

    • wala pong kinalaman ang gobyerno sa pagkasakim sa kita ng ating mga negosyante at lalong walang basbas ang gobyerno sa pagtataas ng presyo ng alin mang goods or services dahil ano man ang pag galaw sa presyo ng mga producto and resulta po yan ng market forces ayon sa prinsipyo ng pagnenegosyo. ang tanging kasalanan lang ng gobyerno ay nagiging inutil sila sa pagiging sakim ng ating mga negosyante..kaya mali ka sa sinasabi mo na may basbas ang gobyerno sa dito..walang gobyerno na ipapahamak nya ang kanyang mamamayan..kahit utak ipis pa ang mga namumuno

  7. Dominic Albert on

    dapat ire-compute din yung previous years (way back to year 2000) yung mga charges ng Meralco

  8. BROWNOUTS IN SUMMER
    High cost of electricity and frequent power outages of MERALCO were the principal reasons why large Manufacturing business industry then left the country for good. To name a few were the textile association of the Philippines, Tire manufacturing association of the Philippines, Food manufacturing associations and host of others which unfortunately translated to displacements of thousands of jobs and livelihood of our countrymen. Do you think MALACANANG/MERALCO et al. Are powerful? Yes, they are. To think that they can mobilize a battalion of PNP forces to assist them to enter your private premises forcibly in suspicion of illegal tapping.

  9. Good morning Bobi, I have not lost my capacity to be outraged, in fact I am more infuriated now than before. Why? Because most of the customers of salim-group owned meralco don’t know is the enormuos amount of money in interests (%) that the meralco -salim group has earned and still continues to earn up to this minute from the amount of money that it has illegally collected from the majority of the consumers before the SC has issued TRO. As a retired small businessman, I know for a fact that if you have so much money in your hands for a short period of time, you can invest or deposit it in a bank as a placement deposit for a short period and you will earn substantial amount of money for that short period. What I am trying to point out here is I am pretty sure that this is what the fund managers of the meralco-salim group is doing.

    It is so easy for the meralco-salim group to say that we have re-calculated and the result is we will roll back the charges to 0.45 but asside from that is there is an issue that they are not talking about is when and how much are they going return of the money of their customers’ that they have illegally collected and what about the cost of that money that they have collected!

    I was listening this morning to Noli de Castro while he is interviewing the spokesperson of the meralco-salim group and i couldn’t help it but to turnoff my radio after the interview and not listen to him anymore because Noli was so ecstatically happy abou the decrease in the charges but he again missed the point of asking the spokesperson when are they going to refund the money that they have illegally collected from their customers, because according to the spokesperson, meralco is always thinking of the welfare of their customers..LOL!!! or maybe the right words are, the meralco-salim group is always thinking of how they can “rob” taken from the phrase “highway robbery” their customers.

  10. efren najito on

    Just like what i’ve said, itong MERALCO ang professional na magnanakaw. at walang makakapansin kaagad dahil maganda ang kanilang mga kagayakan, Ewan ko ba kung bakit hinahayaan lang na makapagnakaw iyang mga iyan ng walang kaparusahan, samantalang sa mga kapuspalad na hindi kaagad makagawa ng paraan upang kagyat ay bayaran kanilang nagamit na kuryente ay may katapat kaagad na lunas upang magkumahog ang may utang sa kanila na magbayad kaagad, at kung hindi ay tanggal metro at may charge kaagad sa reconnection, at bukod doon,kapag minalas malas ka pa eh back to Zero ka na naman. panibagong provide na naman ng requirements ang pobreng consumer.