The decision last July 4 of the Supreme Court-- affirming the order of the Energy Regulatory Commission approving the request by the Manila Electric Co. for a staggered collection of automatic rate adjustments arising from generation costs for November 2013—is to say the least wrong timing.
The SC affirmed the December 9, 2013 order of the ERC to stagger the collection of the generation costs for the said supply months as there is no basis that the regulator committed grave abuse of discretion.
Electricity prices may go up after the Supreme Court declared as “null and void” an order by the ERC imposing regulated power rates at the Wholesale Electricity Spot Market (WESM) where Meralco bought to ensure steady electric supply for its customers—when the Malampaya shutdown along with the stoppage in operations of some generation companies-- for the November and December 2013 supply months.
In a decision penned by SC Associate Justice Jhoseph Y. Lopez and concurred by Chief Justice Alexander Gesmundo and Associate Justices Estela Perlas -Bernabe and Marivic Leonen, the High Court said the ERC order, which voided the Luzon rates in 2013 and instead imposed regulated prices, was based on “unfinished investigation.”
The request for power rate increase stemmed from the shutdown of the Shell Philippines Exploration B.V. (SPEX)-Malampaya operations and the scheduled maintenance of other power generation plants, which, according to Meralco, would amount to P22.64 billion generation cost that would be passed on to its customers.
This would have meant an additional charge of P9.1070 kWh in the December 2013 billing of its customers and would have been allowed under Guidelines for the Automatic Adjustment of Generation Rate and System Loss Rates by Distribution Utilities (AGRA Rules). But in a December 2013 letter to the ERC, Meralco asked for a staggered billing.
Instead of an additional P9.1070/kWh for the December 2013 billing, Meralco wanted to impose only a P7.90/kWh increase and collect the remaining P3 billion in its February 2014 billing. In exchange, Meralco asked ERC that it be allowed to impose a “carrying charge” for deferring the rate hike.
The ERC approved the staggered increase but only at the rate of P7.67/kWh for the December 2013 billing while authorizing an additional P1.00/kWh increase in the February 2014 billing and the balance due on the following month. It did not however grant the “carrying charge.”
The rate hike was never implemented because the Supreme Court issued several temporary restraining orders until indefinitely halting the increase in April 2014.
In its order, the ERC said the rates during the period “could not qualify as reasonable, rational and competitive due to the confluence of factors.”
The ERC was investigating the cause of the high- power rates and allegations of anti- competitive behavior and possible market abuse by some industry players after WESM prices surged to unprecedented levels.
The SC said the ERC did not notify the affected parties about ERC Case No. 2014-021 in violation of their right to due process. “Most of them manifested before this Court that they filed petitions to intervene in the ERC case, and motions for reconsideration of the March 3, 2014 Order, to challenge the premature and erroneous findings,” the court said.
The ERC order voided the rates at the WESM and ordered the Philippine Electricity Market Corp., then operator of the WESM, to recalculate the rates.
Current realities
Our economy is reeling from the scars caused by COVID-19 (which still lingers until today), unceasing spikes in fuel and food prices, uncontrollable inflation (mostly from imported food, fuel and base production materials like farm inputs) and a deteriorating peso such that allowing Meralco to raise its rates now would further burden the consumers (residential and commercial alike).
In a 32-page decision penned by Associate Justice Jhosep Y. Lopez, the Court en banc held that the ERC’s decision to allow the staggered recovery of the adjustment charges while denying Meralco’s request for carrying costs was intended “to protect the interest of the consumers.”
“States, otherwise, the actions of the ERC were in accordance with the law and the rules, and results in a protection of the consumers who did not have to pay the adjustment rates in one bill,” the SC declared.
“Accordingly, there can be no basis to ascribe grave abuse of discretion to the act of the ERC in issuing the December 9, 2013, letter-approval since all it did was to follow existing guidelines on the imposition of the generation rate,” it added.
In a letter dated December 5, 2013, Meralco informed respondent ERC that the total cost of generation to be passed on to its almost-5 million captive customers amounted to P22.64 billion, equivalent to a generation charge for December 2013 billing of P9.1070 per kilowatt-hour (kWh). This is an increase of P3.44 per kwh from the P5.67 per kwh that was billed in the previous month.
‘A win for gencos’
Former Kabataan partylist Terry Ridon said the SC decision would essentially return the question to the ERC to determine the existence of collusion and price-fixing among power generators.
Among the gencos covered by the SC decision were First Gas Power Corporation, South Premiere Power Corporation, San Miguel Energy Corporation, Masinloc Power Partners Co., Ltd., Quezon Power (Phils.) Ltd. Co., Therma Luzon, Inc., Sem-Calaca Power Corporation, FGP Corporation and National Grid Corporation of the Philippines, 1590 Energy Corporation, AP Renewables, Inc., Bac-Man Energy Development Corporation/Bac-Man Geothermal, Inc., First gen Hydro Power Corporation, GNPower Mariveles Coal Plant Ltd. Co., Panasia Energy Holdings, Inc., Power Sector Assets and Liabilities Management Corporation, SN Aboitiz Power, Strategic Power Development Corporation, Bulacan Power Generation and Vivant Sta. Clara Northern Renewables Generation Corporation.
“This is a win for power generators in the context of limited supply then and continuing limited supply now. The onus is now on the ERC to enact penalty provisions on generators that undertake unplanned or forced outages which correspondingly spiked prices in the electricity spot market,” Ridon said.
Meralco, for its part, has yet to receive the official copy of the decision.
“Once we receive it though, we will need to study the reported SC decision to understand and see what the actual impact will be,” Meralco said.
Meralco’s petition
Meralco cited the abrupt increase in the generation cost to the supposed maintenance shutdown of the Malampaya facility. This facility supplies natural gas to three major power plants—Ilijan, San Lorenzo and Santa Rita—that, in turn, supply an aggregate capacity of 2700-megawatt (MW) electricity to franchise areas. Meralco further said that the shutdown of Malampaya coincided with the scheduled maintenance of two other plants—Pagbilao 2 and Sual 1—that also collectively contribute over 950 MW to its requirements.
Because of these shutdowns, Meralco was forced to buy expensive power from the Wholesale Electricity Spot Market (WESM).
The petitioners against ERC’s approval of Meralco’s price hikes include representatives from Party-list groups such as Bayan Muna, Gabriela Women’s Party, ACT Teachers Party-list and Kabataan Party-list, National Association of Electricity Consumers for Reforms, Federation of Village Associations and Federation of Las Pinas Homeowners Association.
Named as respondents were the ERC, Meralco and the Philippine Electricity Market Corp. and power generation companies such as First Gas Power Corp., South Premiere Power Corp., San Miguel Energy Corp., Masinloc Power Partners Co. Ltd. and several others.
In assailing the legality of the rate increase, the petitioners argued that the ERC committed grave abuse of discretion in approving Meralco’s proposal to pass on to consumers the increase in generation cost without complying with requirements.
The groups noted that the proposal was approved without the conduct of a public hearing as required in the implementing rules and regulation of the Electric Power Industry Reform Act (Epira) or Republic Act 9136. They added that ERC’s approval of Meralco’s proposal to pass on to consumers the increase in the generation cost for November 2013 violates the Epira law.
According to the petitioners, Section 43 of RA 9136 mandates the ERC to promote competition and penalize abuse of market power in the restructured electricity industry.
They argued that the right of customers for due process has been violated when Meralco started increasing its rates without notice and public hearing. The petitioners added that no publication or public advisory in major publications of the rate increases.