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By Patricia L. Adversario, Senior Reporter
Conclusion
(According to the Commission on Audit, the
Manila Electric Co. and other power utilities include civic club
membership fees, gifts to visiting guests, even allowances for
traffic aides and policemen as operating expense in their financial
statements. This last installment details what other incidentals
could have been passed on to consumers if they were not disallowed
in audit.)
In a special audit on Meralco conducted from
Feb. 1, 1994 to Jan. 31, 1995, the Commission on Audit reclassified
some P2.27-billion worth of the utility’s operating expenses into
miscellaneous deductions from income.
COA said any expense that can be considered for
rate determination should be necessary in the operation of the
utility, should be recurring, and should benefit the consumers. A
detailed list of expenses showed a gamut of various incidentals that
the COA disallowed because these were not necessary in the operation
of the utility and did not directly benefit the consumer. These
included:
• Allowances for traffic aides and traffic
policemen.
• Snacks and meals served during various staff
meetings and orientation seminars.
• Cash prizes for Best Safety Speaker Contest.
• Membership fees for Rotary Clubs.
• Meal expenses at various Rotary Club
meetings.
• Christmas decorations.
• Raffle tickets.
• Floral wreaths, Mass cards for deceased
employees as well as retirees.
• Meals and Johnny Walker for labor arbiter.
• Tip worth P2,000 to waiters during Service
Award
Testimonial dinner.
• Plastic cover for books at the Legal
Satellite library
• Send-off gifts for visiting guests.
According to COA, these expenses should be
considered as income deductions and should be borne by the
stockholders, not by the consumers.
Meralco also claimed other expenses which were
“ordinary and necessary to business operations” but COA
disallowed these deductions, saying they were not necessary in its
operation.
Again, the example cited were the operation and
maintenance expenses for Meralco Theater. These costs should be
drawn from the theater’s income, the COA said.
Taken individually, these costs when compared to
the provision of P2.1 billion for income tax do not add up to a
significant amount. But as an aggregate value, they are significant
since they should not have been included as items for rate
determination and passed on to consumers, COA said.
While other power distributors, particularly
electric cooperatives, acknowledge Meralco as “one of the best
managed and most efficient power utilities,” questions still
arise: At what cost is this efficiency level realized? Does a public
utility have to pass on a significant amount of its ope-rating cost
to its consumers to be efficient?
The government auditors said that based on the
financial statement, Meralco could still finance its ope-rations
even without the recovery of corporate income tax from the consumers
— as shown by the excess of actual rate of return over what is
allowed.
During the period in review, Meralco achieved a
21-percent rate of return because it included income tax and other
expenses that they were not allowed to recover.
Public utilities are allowed a return of at
least 12 percent.
At that level, a company should be able to
operate efficiently.
Nelia Villeza, supervisor of the COA team that
made the audit, stressed the urgent need for public utilities to be
audited whenever they apply for a rate increase. But she admits that
lack of manpower stops COA from conducting audit work as and when
needed.
Apart from power, public utilities also cover
water, oil firms, telecommunications, and shipping, and the same
audit rules apply. The COA has yet to conduct an audit on oil firms.
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