A consumer’s group has assailed a resolution of the Energy Regulatory Commission (ERC) establishing its methodology for calculating power rates, saying that this new system has already inflicted a burden on consumers.
In its petition to the Supreme Court, the National Association of Electricity Consumers for Reform (NASECORE) said the ERC’s decision to replace its Return on Rate Base (RORB) methodology for calculating electricity rates with a Performance-Based Regulation (PBR) system has only resulted in consumers paying higher electricity rates, while power distributors saw record earnings.
NASECORE argued that the PBR resulted in higher costs for consumers rather than ensuring the lowest possible rates, as mandated under the principle of “recovery of prudent and reasonable costs” in the Electric Power Industry Reform Act (EPIRA).
This meant that that consumers are forced to “prepay” utility expenses without assurances of improved service quality, since the PBR system allows distribution utilities to charge consumers based on forecasted costs rather than actual investments.
NASECORE President Pete Ilagan also noted that that the “average price cap mechanism” that limits the revenue per kilowatt-hour utilities can earn within a specific period only benefitted large power utility companies like the Manila Electric Company (Meralco).
“It appears that the ERC successfully implemented the PBR during its early years, which resulted in unprecedented profits for Meralco, peaking at 51 percent,” Ilagan added.
Under the PBR, the ERC is required to conduct a regulatory reset process for each period: the first from July 2007 to June 2011, the second from July 2011 to June 2015, and the third from July 2015 to June 2019. The last reset was conducted during the third period.
The ERC, however, failed to publish a regulatory reset issue paper 21 months before the end of the regulatory period, as required for consultations and hearings.
The group also accused the ERC of abusing its discretion by abandoning the RORB, as mandated by EPIRA, in favor of the PBR, which was developed by the commission.
“The ERC’s unchecked discretion risks placing certain actions beyond judicial review,” NASECORE added.
Photo Courtesy: Energy Regulatory Commission
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