ERC repeats past errors

This week we digress from our franchise narrative. Meralco has filed two (2) rehashed rate applications. The Energy Regulatory Commission (ERC) has set them for hearing on February 28 and March 3. We have to weigh in.

ERC Case No. 2025-025 is “for confirmation of the True-Up calculation of the Actual Weighted Average Tariff (AWAT) vis-a-vis Approved Final Distribution Rate xxx from July 2022 to December 2024.” Here Meralco is proposing to refund P19.096B over 36 months, net of an P862M claimed over-refund from previous True-Ups.

The other is ERC Case No. 2025-035 “for approval of the Annual Revenue Requirement and Performance Incentive Scheme for the Revised Fifth Regulatory Period (RYs 2026-2029). Meralco is proposing a peak rate of P1.6899 pkwh from the present rate of P1.35 pkwh. The forecasted annual energy consumption ranges from 55B kwh to 60B kwh; claimed revenue requirement increases from P81.8B in 2026 to P114.6B in 2029.

The applications were duly copied to the Governors, Mayors and local legislatures of the LGUs covered by the Meralco franchise – 242 in all – but come hearing dates, not one of them will show up. Not even with the convenience offered by the online or virtual attendance. Because it is election season and these 242 must put up appearances of standing up for their constituents, the LGU turn out may yet surprise us. But I will not hold my breath on that. Some LGU executives can either be thick skinned or hare-brained – either way, we cannot make any bets on them getting heat up on the power rates and Meralco’s charges.

The Solicitor General, Commission on Audit and the chairmen of the Senate and House Committees on Energy are also in the mail list but just like the LGUs, notice to them is notice to the dead. They too are not seen at rate hearings. Truly sad.

Meralco’s latest filings is a good opportunity for stakeholders, particularly the captive residential customers, to unite against the failures and inadequacies of ERC that enable Meralco to charge excessive and unjust rates. The hearings provide the perfect platform for mounting a campaign to set the industry right, the regulation straight and the utilities honest. The two cases apparently being part of the effort to salvage ERC’s Performance Based Regulation (PBR) from its ignominious failures, they actually show, instead, the shortcuts taken and the processes and rules ignored to suit pre-conceived decisions.

The AWAT True-Up case, for instance, represents a 2-year addition to the 7-year Lapsed Period, bringing the total renegade rate period to nine (9) years. I use the term renegade in the context of rejection or defiance of a lawful norm. The AWAT True-Up under the Rules is an annual mechanism for adjusting forecasted sales and estimated costs to actual annual sales and costs, within a 4-year regulatory period, so that the difference, up or down, does not result in an over or under charge by the utility. To stretch its application to seven (7) years straight and now plus two (2) more, that is a defiance of the AWAT True-Up Rule.

Moreover, in the regular and Rule-based true-up, the calculation of the over or under recovery is based on a duly approved Maximum Annual Price (MAP) for the adjustment year. In this case, there was no such price or MAP because in 2015, due to ERC’s failure (Unexplained up to now!) to issue the Rules for Setting the Distribution Wheeling Rates (RDWR) the rate reset that should have determined the MAP or Maximum Average Price for the 4th Regulatory Period was not set. In that regulatory hiatus, Meralco filed an application for an Interim Average Rate (IAR) in July 2015, the 4th Regulatory Period having actually started on July 1, 2015. The IAR applied for and approved was the Smoothed Maximum Average Price (SMAP) of the just lapsed 3rd Regulatory Period, a rate or price that was approved in June 2011 under ERC Case No. 2010-069RC.

Since then, the Honorable Commission has not conducted to full and valid completion a rate reset for Meralco, thus there could be no valid and regular or rule-based true-up of Meralco’s rates.