SC orders Meralco to refund consumers for unauthorized hike
Thursday, August 17, 2006
By REY G. PANALIGAN
The Supreme Court (SC) ordered the Manila Electric Co. (Meralco) yesterday to refund to its consumers the 13.27 centavos per kilowatt hour (kwh) unauthorized increase on its generation charge granted by the Energy Regulatory Commission (ERC) on June 2, 2004.
In a 21-page unanimous resolution written by Justice Romeo J. Callejo Sr., the SC said the computation of the amount of refund should be reckoned from the time the unauthorized increase was charged and collected from consumers.
It said that instead of the actual refund, Meralco may correspondingly credit in favor of the affected consumers the appropriate amount for their future consumption. It directed the ERC to ensure the proper execution of the refund order.
The refund was ordered by the SC as it denied the motions filed by Meralco and ERC to reconsider its Feb. 2, 2006 decision that nullified the increase. With the denial, the decision was declared final and executory.
This was the third refund order issued by the SC for the past four years. In 2003, the SC — in a decision written by Senior Justice Reynato S. Puno — ordered Meralco to refund 16.7 centavos per kwh collected from consumers representing the income tax charges incorporated in its basic rates since 1994. The SC also ordered Meralco to stop the inclusion of income taxes in the computation of its operating expenses.
On June 15, 2004, the SC — in a decision written by Justice Dante O. Tinga — ordered Meralco to refund 12 centavos per kwh collected from consumers starting on Jan. 2, 2004.
Among other things, the SC said the provisional adjustment in the Meralco rates was granted by ERC without the required publication of the petition for increase.
In nullifying the 13.27 centavo per kwh increase in its Feb. 2, 2006 decision, the SC ruled that the amended application of Meralco lacked the basic requisite of publication mandated by the implementing rules and regulations (IRR) of the Electric Power Industry Reform Act (EPIRA) of 2001.
At the same time, the SC said that the implementing rules of the Generation Rate Adjustment Mechanism (GRAM), which was the basis of Meralco’s rate increase application, was not published in the newspapers in violation of Executive Order No. 200 that repealed Article 2 of the Civil Code, or filed by the ERC with the Office of the National Administrative Register (ONAR) in contravention of the provision of the Administrative Code of 1987.
It said that under the provisions of EPIRA, the application for rate increase must be published, not merely the notice of hearing issued by the ERC, and the comments of the consumers and the local government units must be considered by the commission.
"The lack of publication of respondent Meralco’s amended application for the increase of its generation charge is thus fatal, and by this omission, the consumers were deprived of the right to file their comments thereon," it said.
"With respect to the GRAM implementing rules, its publication in the Official Gazette or in a newspaper of general circulation is mandated by the fact that these rules seek to implement key provisions of the EPIRA. More importantly, the GRAM implementing rules, insofar as it lays down the procedure by which generation costs of distribution utilities are recovered, affect ultimately the public as consumers of electricity and who pay the charges therefor," it also said.
The GRAM, which was an offshoot of the unbundling of rates of Meralco, replaced the power purchased adjustment (PPA) then collected by distribution companies to recovered costs of purchased power from the National Power Corp. (Napocor).
With the ruling, the High Court granted the petition filed by the National Association of Electricity Consumers for Reforms (Nasecore) represented by Petronilo Ilagan, the Federation of Village Associations represented by Siegfriedo Veloso, and the Federation of Las Piñas Homeowners Associations represented by Bonifacio Dazo.
The ERC and Meralco asked the SC to reconsider its decision.
In its motion, Meralco said that the implementation of the decision "would result in severe repercussions to the entire electric industry which would be buried in a deep quagmire of financial trouble."
It said that not only itself but other distribution utilities and the National Power Corp. (NPC) acted in good faith relying upon the rules and regulations issued by the ERC, and "the nullification of the rules (on the increased rate) must be applied prospectively so as not to unduly prejudice the utilities."
The ERC, on the other hand, said that it does not have the resources and the personnel to undertake the notice and hearing requirements required by the SC before acting on rate increase petitions.
"Pending any action on these petitions, the distribution utilities would not be able to recover, through their rates, any increase in the costs of purchased power, which they already shouldered and paid in advance to the generation companies, thereby seriously impairing their cash positions and viability to continue with their operations," ERC said.
Their motions were, however, denied by the SC and declared its ruling final and executory.
On Jan. 21, 2004, the ERC approved a R3.1886 per kwh for Meralco’s generation charge.
However, Meralco amended its original petition and asked that its generation charge be approved at R3.4664 per kwh. Meralco said that its proposed generation charge incorporated in its amended petition was computed in conformity with the generation rate formula under GRAM.
After hearing, the ERC granted, not the R3.4664 per kwh as contained in Meralco’s amended petition, but only R3.3213 per kwh from the original R3.1886 per kwh.
Immediately after the issuance of the ERC order allowing the increase, Nasecore and other consumers groups filed with the Supreme Court a petition challenging the adjusted rate.
They said that the ERC order should be nullified for lack of requisite publication of Meralco’s amended petition in violation of the EPIRA and procedural due process.
For its part, Meralco said that to comply with the EPIRA requisite on publication would subject it to a long and tedious process of recovering its fuel and purchased power costs, contrary to the intent of GRAM.
But the SC said: "Thus, respondent Meralco’s apprehension of being subjected to a long and tedious process with respect to the recovery of its fuel and purchased power costs is, in fact, addressed by the power of the ERC to grant provisional rate adjustments. The ERC is not, of course, precluded from promulgating rules, guidelines or methodology, such as the GRAM, for the recovery by the distribution utilities of their fuel and purchased power costs. However, these rules, guidelines or methodology so adopted should conform to the requirements of pertinent laws, including Section 4(e), Rule 3 of the IRR of the EPIRA."
posted by philpower @ 8:22 AM,
