SC ruling opens doors to power rate refunds

REPORT FROM BUSINESSWORLD Manila Electric Co. (Meralco) consumers can look forward to another refund as the Supreme Court on Wednesday upheld its decision to nullify a P0.1327 per kilowatt-hour (kWh) rate hike implemented two years ago. Electricity users nationwide could also benefit, and other power firms affected, as the original high court ruling had cast doubt on the validity of the regulatory process used to approve Meralco’s rate adjustment. In an en banc resolution, the Supreme Court denied with finality separate motions for reconsideration by Meralco and the Energy Regulatory Commission (ERC) regarding a February 2 decision that voided the ERC order approving the increase. Meralco president Jesus P. Francisco said the company is now looking for ways to implement the ruling, to be done in coordination with the ERC. "It all goes back to the issue of under-recovery. We will ask the ERC for authority to recover this cost in another manner although we are not yet sure how," he said. Meralco vice-president for utility economics Ivanna G. dela Peña said the company will have to refund some P800-850 million for the three months that it collected the P0.1327/kWh increase, which raised its generation charge to P3.3213/kWh. Ms. dela Peña said it is not yet clear how long it will take Meralco to implement the refund. "We have to confer with the ERC for the implementation. We still don’t know," she said. The court gave Meralco the option to credit the amount to future consumption instead of an actual refund. The Supreme Court ruling covers the generation charge adjustment from June 2004 to August 2004, which had been allowed by the ERC by way of the periodic generation rate adjustment mechanism or GRAM. The GRAM is a cost recovery mechanism good for three months which allows power distributors to adjust generation charges to reflect changes in fuel prices and the cost of power purchased from producers, including state-owned National Power Corp. The court ruled that Meralco’s application for an increase was not published in a newspaper of general circulation, in violation of Sec. 4 (e) of Rule 3 of the implementing rules and regulations of Republic Act no. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA). This provision, the tribunal said, covers "any application or petition for rate adjustment or any relief affecting the consumers." Meralco and the ERC had contended that the provision applied only to a general rate increase application of a distribution utility and not to an application for cost recovery. It said the increase in generation charges was not a rate increase per se but an adjustment to recover purchased power or fuel costs. There was no need to publish the application, they said, as the GRAM mechanism is independent of the EPIRA. However, the court pointed out that even the implementing rules of the GRAM, promulgated by the ERC on February 24, 2003, were not published as required by law but the mechanism was implemented anyway. "Consequently, the GRAM implementing rules have no force and effect for it is axiomatic that publication in the official gazette or a newspaper of general circulation is a condition sine qua non before statutes, rules or regulations can take effect," it said. ERC officials were not immediately available for comment. This concern had been raised earlier this year when the Supreme Court first junked the P0.1327/kWh Meralco increase, and regulators said they still had to figure out how many GRAM adjustments are affected. The high court clarified the case at hand only involves the Meralco increase, but kept open the possibility that it could apply to other ERC decisions. "The Court, without overreaching itself, cannot extend the present ruling to other ERC orders which have not been brought before it. Hence, the applicability or non-applicability of the ruling in the present case to the other orders of the ERC will have to be determined if and when the proper petitions are filed with the Court," it said. The Supreme Court said the coverage of the EPIRA extended to "any application or petition that would result in the adjustment or change in the retail rate or total price paid by the end-users, whether such is occasioned by the adjustment or change in the charges for generation, transmission, distribution, supply, etc." The consumer group National Electricity Consumers for Reform, which had questioned the Meralco adjustment, welcomed the court’s decision. Nasecore president Pete Ilagan said the high court’s ruling underscored the need to conduct public hearings on power rate adjustments. Meralco in 2002 was ordered to refund customers some P30 billion after the Supreme Court ruled that it had overcharged its clients. -- PCHH and ICCG/BusinessWorld