Ombudsman urged to probe ERC over 'failure' to curb high power rates

A consumer advocacy group on Tuesday called on Ombudsman Jesus Crispin Remulla to investigate the state-run Energy Regulatory Commission (ERC) over its alleged failure to prevent the imposition of high electricity rates.

United Filipino Consumers and Commuters (UFCC) president Rodolfo Javellana Jr. and Marcelo Tecson made the call in a letter to the Ombudsman submitted on Tuesday, June 9.

It said the ERC had previously stated that a 2002 Supreme Court ruling setting a 12% rate of return for public utilities such as Manila Electric Co. (Meralco) is no longer applicable under the ERC-implemented performance-based regulation (PBR) rate-setting methodology.

“ERC has allowed Meralco’s after-tax return on equity (ROE) to reach levels much higher than 12%. As shown in Meralco’s annual report to the SEC posted on its website, its ROE was 25%—more than double the 12%—as of 2012, and 32%, or almost triple, by 2024," they said

"We are constrained to make this timely, overdue request for help from the Office of the Ombudsman, mandated under Article XI, Section 13 of the Constitution to investigate public officials’ illegal, unjust, improper, or inefficient acts or omissions in government,” the letter read.

The complainants said that Meralco’s “excessively high annual rate of return” was “obviously derived from unreasonably high power rates.”

In response, the ERC said the claims of Javellana and Tecson regarding allegedly overpriced electricity rates are false.

“If the Ombudsman acts on this and requires us to submit a comment or response, then we will do so at the proper time and venue," the ERC said in a statement.

"Meanwhile, we have already responded to Mr. Tecson’s letter and explained how we determine the allowable rate of return, which is not capped at 12%, contrary to what he is espousing," it added.

The ERC did not cite it, but the same 2002 Supreme Court decision invoked by Javellana and Tecson provides that the determination of just and reasonable rates charged by a public utility is based on three major factors:

• rate of return
• rate base
• the return itself, or the computed revenue to be earned by the public utility based on the rate of return and rate base

The decision explains “rate of return” as a percentage used to make sure a utility earns a fair profit. When this percentage is applied to the value of the utility’s assets, it determines how much income it is allowed to earn for providing public service.—MCG, GMA News