"CONSUMER UNFRIENDLY"
Hontiveros urges ERC to simplify power rate-setting mechanism, replace 'complex' PBR

Senator Risa Hontiveros today urged the Energy Regulatory Commission (ERC) to review its power rate-setting mechanism, saying that its complex and ambiguous nature leads to questionable over-recoveries, making it 'consumer unfriendly'.

The statement came after Manila Electric Company (Meralco) slashed its power rates for a second straight month in March, factoring in the approved refunds ordered by the power regulator.

Hontiveros said that while the P13B Meralco refund to consumers is good news to welcome, the decision of ERC to grant Meralco's petition "obscures the original sin" that created the problem of over-recovery, if not fraud, in the power industry.

"Magandang balita sana na bababa ang babayaran natin sa kuryente. Pero kung tutuusin, soli-bayad lang naman ito sa sobra nilang nasingil," Hontiveros explained.

That original sin, the senator pointed out, was the rate-setting methodology called Performance-Based Regulation (PBR) that the Commission adopted in early 2000 replacing the old but tested Return on Rate Base (RORB) method. The PBR is assailed by consumer groups as "too complex to understand", and by the Supreme Court for "transferring wealth from electricity consumers to utilities' shareholders".

"Matagal nang hinihingi ng consumer groups maibalik sa dating RORB ang rate-setting mechanism dahil mismong ang ERC ay hindi maipaliwanag kung bakit ang mga utility tulad ng Meralco ay umabot sa 15.50% ang weighted average cost of capital (WACC) na sinisingil sa ilalim ng PBR. Lagpas ito sa 12% return na itinatakda ng batas para sa mga public utilities," Hontiveros said.

The Senator added that during the Senate deliberations that she initiated on the Chinese control of the national grid, it was revealed that ERC granted the National Grid Corporation of the Philippines (NGCP) the same WACC of 15% when NGCP's market risks are much lower than that of MERALCO's.

"Hinahamon natin ang ERC na gumamit ng regulasyon na mas madaling maunawaan, may basehan na consistent sa direktiba ng EPIRA na magkaroon ng methodology that allows the recovery of just and reasonable costs at hindi base sa inflated forecasted cost na nangyayari ngayon sa PBR. Imbis na bumaba ang singil, mas tumaas pa gamit ang PBR," Hontiveros said.

"Public utilities, such as the power sector, are imbued with public interest. Tungkulin ng gobyerno, ng ERC bilang regulatory body na proteksyunan ang interes at kapakanan ng publiko mula sa anumang pagmamalabis o pananamantala," Hontiveros concluded.