ERC may have tossed Meralco a lifeline

Ben D. Kritz

Ben D. Kritz

Like the rest of the persecuted consumers of the Manila Electric Co. (Meralco), I was initially encouraged by the news earlier this week that the Energy Regulatory Commission (ERC) had finally been shaken out of its torpor and obliged to fulfill its legal mandate to intervene in the scandalous electric rate-hike conspiracy carried out by the nation’s largest utility distributor and its electricity supply partners. In a ruling (ERC Case Number 2014-021MC) dated March 3 and made public this past Tuesday, the Commission voided the prices at which electricity was purchased in the Wholesale Electricity Spot Market (WESM) for the November and December 2013 supply months, and ordered the WESM to recalculate and re-bill the affected distribution utilities at the corrected rates within seven days.

On close reading of the 35-page order, however, there are a number of red flags that suggest that, even now, Meralco may still be given the opportunity to soak its customers on behalf of its suppliers.

The worst of these is the exemption of Meralco from the terms of the ruling, out of deference for the outstanding temporary restraining order (TRO) issued by the Supreme Court against the December rate hike. What the ruling says specifically is:
“PEMC [Philippine Electricity Market Corp.] is hereby directed within seven (7) days from receipt hereof to calculate these regulated prices and implement the same in the revised WESM bills of the concerned distribution utilities in Luzon for the November and December 2013 supply months for their immediate settlement, except for Meralco whose November 2013 WESM bill shall be maintained, in compliance to the temporary restraining order issued by the Supreme Court in G.R. No. 21024 and G.R. No. 210255.”

Meralco’s December 2013 WESM billing is not mentioned at all, which could be an intentional oversight or simply the result of sloppy language. The ruling could be interpreted as implying that Meralco’s December is not exempted from the recalculation. If that is the case, though, why would the ERC exercise the diligence to provide an extensive preamble justifying their authority to make the ruling based on the provisions of the Electric Power Industry Reform Act of 2001 (Epira), the Philippine Constitution, and the social contract theories of Thomas Hobbes, John Locke, and “Jacques Rousseau,” and then become cryptic in the most important part of the edict?

Beyond that, the “professional courtesy” excuse – that the ERC is not taking action because of the existing Supreme Court TRO – is a complete cop-out which may very well support Meralco’s efforts to have the TRO withdrawn. The ERC is mandated by the Epira law, which in turn draws the authority to make that mandate from the Constitution, to regulate electricity rates in the Philippines; the Supreme Court is not.

And the argument has been raised several times during the Supreme Court’s en banc hearings – both by the various respondents in the case and the justices themselves – that the petitioners who sought the TRO and are seeking to have Meralco’s rate hike nullified did not fully exhaust all regulatory remedies before appealing to the Court, and this ERC ruling would seem to give considerable weight to that argument. The ERC’s statement could be construed to mean, “Had the Court not intervened, the Commission would have included Meralco in this ruling,” particularly if justices like Chief Justice Sereno and Associate Justice Leonen, who have already demonstrated their sympathy to the power industry’s and the Palace’s common cause, are the ones doing the construing.

Why the ERC did not fully do its job and include Meralco in the ruling voiding the WESM prices simply has no legitimate explanation. At worst, the ERC’s ruling would have rendered moot any further action by the Supreme Court, which would not be a bad outcome because it is not at all clear what the Supreme Court can or is expected to do in the rate hike case.

Presumably, the Supreme Court could decide that there was a conspiracy between suppliers and Meralco, or among suppliers alone, to artificially inflate prices and that the rate hike which resulted was therefore improper, and this is the aspect that Malacañang Talking Person Edwin Lacierda was referring to earlier this week when he said that the ERC ruling could perhaps be “part of the appreciation of facts” before the Supreme Court. The ERC ruling, while not recommending charges or imposing penalties on the offenders (an omission which has drawn sharp criticism from several lawmakers and consumer action groups), actually did determine that conspiratorial actions took place, in the form of widespread violations of the WESM’s “must offer” rule. As the ERC is the authority charged with regulating the electricity sector, it has already taken the step which would be the logical outcome of a favorable Supreme Court decision, so again the question must be asked: Why is Meralco specifically excluded from that?

Meralco rather cynically might have inadvertently revealed the hoped-for scenario in its public response to the latest ERC decision, assuring the public that the company “would abide by” the ERC’s directions regarding the recalculated rate. As the ERC has repeatedly pointed out, it did not actually approve the rate hike, only Meralco’s request to divide the increase into smaller parts. The rate hike itself was Meralco’s own doing, permitted under the Automatic Rate Adjustment (AGRA) rules. Since the actual question before the Supreme Court is whether or not the increase in the generation charge passed on to Meralco consumers was imposed in violation of any applicable laws or regulations, the Court may very well decide that the ERC has taken the appropriate action with the order voiding the WESM prices, and end its involvement in the controversy. If that happens, Meralco will have a window of opportunity in which it will be unconstrained by a court order, an opportunity it will certainly use to collect its deferred rate increase as quickly as possible. And while it is doing so, it will be “complying with the ERC order,” because the ERC order doesn’t cover Meralco, at least not until the Commission issues a revised order – something that might take weeks, if the regular process is followed.

In order to solve this potential problem, what the ERC must do, right now, is to correct its flawed March 3 ruling to remove the Meralco exception or to clearly state that the applicability of the ruling to Meralco is merely “on hold” (rather than “excepted”) until the Supreme Court decides on the case.


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