ERC dismisses overcharging raps vs Meralco
MANILA, Philippines — The Energy Regulatory Commission (ERC) has dismissed allegations of the Commission on Audit (COA), which claimed that the Manila Electric Co. (Meralco), the country’s biggest power distributor, overcharged customers by as much as P7 billion in 2004 and 2007.
The ERC, in its order dated June 21, 2011, maintained and affirmed its findings and conclusions in its decision dated March 20, 2003 and order dated May 20, 2003, directing Meralco to implement its unbundled rates. Accordingly, the latest order made final these ERC-approved unbundled rates.
COA earlier revealed that the unbundling of Meralco rates effectively resulted in over-recoveries, or specifically, revenues in excess of the required revenue by P1.682 billion in 2004 and by P5.327 billion in 2007.
In the COA report, it said that excesses in revenues were determined after it found certain factors or items, which should not have been included in the computation of Meralco’s revenue requirements.
However, the ERC countered these claims, noting that there may have been several factors that were not accounted for by the COA, which led to the latter’s findings of excess revenue or over-recovery on the part of Meralco.
It said that the 1.04-percent average increase in Meralco’s distribution revenues should not be treated as an over-recovery as claimed by the COA, but merely as a consequence of increased kilowatt-hour sales.
COA also used a rate of return of 12 percent while the ERC-approved weighted average cost of capital (WACC) was higher at 15.5 percent. It also did not take into account the so-called incremental costs, as well as disallowed certain items to be recovered from the customers, but which were accepted and allowed by the ERC.
The ERC further noted that the COA audit “disregarded the fact that for purposes of determining the utility’s rate base, the present or market value of its properties should be determined. The assessment of the assets changes over time such that some of these assets may have depreciated while the others may have appreciated. Either way, the value of the properties will no longer be the same.”
“It is worth mentioning that Meralco’s assets increased by 10 percent and 15.54 percent for 2004 and 2007, respectively. Meralco’s rates had been approved by the (ERC) but had not been adjusted for any incremental cost/asset after year 2000 despite the approval of its capital expenditure projects,” the ERC explained.
