19/11/2024
Legal Spaghetti: Not just Meralcoโs Wires
Atty. Lester Nazarene V. Ople
The Filipino language colorfully describes entangled overhead electrical wires as โspaghetti wires.โ Itโs funny because not only can the word โspaghettiโ describe entangled overhead electrical wiring, but it also aptly describes the story of MERALCOโs per kilowatt-hour rate. The description of "spaghetti" is made more apt with the evening news report saying that the Energy Regulatory Commission has ordered the regulatory reset of MERALCO.
Here, I undertake to explain the convoluted saga of MERALCO rate cases beginning from the last ERC-approved rate, all the way until the current applications now pending before the Energy Regulatory Commission and the Court of Appeals, for the appreciation of the ordinary consumer so inclined to be informed.
1. Starting Point: ERC Case No. 2015-112 RC filed 11 June 2015
In this application, MERALCO applied for an Interim Average Rate (IAR) of PHP1.3939/kWh which will be translated into a distribution rate by customer class. On 10 July 2015, the ERC en banc granted Provisional Authority to implement an IAR of PHP1.3810/kWh instead. It must be noted that the Order emphasized that the 3RP will be subject to a true-up in accordance with the 6 July 2011 Order in ERC Case No. 2010-069 RC.
2. ERC Case No. 2020-043 RC filed 23 December 2020
In this application, MERALCO proposed to use the true-up calculation of the Actual Weighted Average Tariff (AWAT) vis-ร -vis the IAR of PHP1.3810 for the lapsed regulatory years, and the approval of the refund scheme to account for the lapsed regulatory period, particularly the refund of around PHP14B.
The ERC granted Provisional Authority for the refund of PHP14B shortly after the filing thereof.
In an Order dated 16 June 2022, the ERC approved, with modifications, the application of MERALCO for the true-up calculation of the AWAT vs the IAR.
Particularly, the said Order:
a) Recognizes that Sec. 43f of the EPIRA empowered the ERC to adopt a rate-setting methodology that would ensure a reasonable price of electricity;
b) Recognizes that the โbest way forward from this situation is to immediately conduct the Reset Process for these PDUs in order to have a reasonable distribution rate that is just to all stakeholders, especially the consumers;
c) Recognizes that since RDWR is a forward-looking rate setting mechanism, certain RDWR provisions are not applicable to the lapsed period;
d) Adopted a confirmation and true-up process that yielded a recomputed IAR of PHP1.3522 as against the AWAT to determine resulting overrecovery, emphasizing that the confirmed rates shall be based on adjusted RAB and recomputed IAR of MERALCO.
Additional note, the ERC gave credence to the arguments of AJN regarding the erroneous double-counting of inflation.
Lastly, the ERC approved an additional refund of PHP 21B by virtue of its Decision that disposed of the same.
AJN filed a Motion for Partial Reconsideration, and asserted that while the refund is welcome, the Commission erred in correcting the double-counted inflation and there is at least PHP 84B that must still be refunded, among other defects submitted to the ERC itself.
The ERC ruled against the Motion for Partial Reconsideration and affirmed the earlier decision. Post-judgment remedies are being sought in this case.
3. Consolidated 3RP Cases: ERC Case Nos. 2010-069 RC, 2011-088 RC, 2012-054 RC, 2013-056 RC, and 2014-029 RC
In an Order dated 10 June 2022, the ERC consolidated a Decision on the MAP applications of MERALCO covering the years: 2012 (2011-088RC); 2013 (2012-054RC); 2014 (2013-056RC); and 2015 (2014-029RC).
It must be noted that in page 110 of this Decision, it is stated that on 21 March 2019, the Commission resolved that the results of the RAB true-up will be the basis to resolve the provisional MAPs for the 3RP and to determine an acceptable opening RAB to be rolled forward to the next RP, yet there was no dated and numbered resolution or decision it alluded to. A search of the ERC Promulgations page also does not yield a published resolution or order pertaining to the same. The text of this resolution is important because this is what supposedly authorizes the finalization of the Decision in ERC Case No. 2010-069RC. Recall that 2010-069RC is the Petition for the 3RP ARR and P*S of Meralco, which supposedly would be finalized through a true-up regular reset process as provided for in its 6 July 2011 order.
4. ERC Case No. 2022-015 RC
This is the 5th Regulatory Period ARR and P*S application of Meralco. This was filed by Meralco in 2022, and pre-trial was completed in 2022. However, for some reason, no action was done from the conclusion of the pre-trial, until Meralco filed a Motion to Withdraw the said petition, on the ground that the Performance-Based Rate Setting Methodology of the ERC is forward looking, and that since two regulatory years lapsed- 2022 and 2023- their submissions are now defective. The ERC issued Orders setting the instant case for trial and requiring Meralco to file amended judicial affidavits to support its application. However, Meralco filed a Motion for Partial Reconsideration seeking ERC approval to withdraw the application. In an Order dated October 30, 2024, the ERC granted this Motion for Partial Reconsideration and ordered the following:
a) The ERC shall motu propio initiate a Rule Making case to promulgate the RDWR;
b) The Regulatory Years for the 5th RP shall cover 2025 to 2028; and
c) Denying all other pending legal incidents filed by the Intervenors in this case.
As an additional point, it must be emphasized that in G.R. No. 226443, October 08 2019 the Supreme Court resolved NASECOREโs petition for certiorari against ERC and Meralco, and ruled that the Commission on Audit may be called on to audit Meralcoโs submissions in a rate case. To our knowledge, this case remains pending due to a Motion for Reconsideration filed.
As we now face another round of marathon hearings that will draft the rules applicable to the 5RP, and actually kick off a regulatory reset for Meralco, it is important for the general public, as well as consumer rights advocates to participate and disentangle the messy pile of "spaghetti" that is the Meralco distribution rate.