Right complaint, wrong question on Meralco’s ‘ECQ’ bills

(OUR) organization (MSK) was excited when it was invited to participate in a Zoom Meeting called by the House Committee on Energy last July 2.

The official title of the proceedings was “Inquiry on the High Electricity Bills: Meralco’s Report on their Actions Made on the Alleged Irregular Charges to Consumers during the ECQ and GCQ Period.”

Thousands of Meralco consumers have complained about their shockingly high electricity bills that they received for April and May during these on-going Covid-19 Quarantine periods.

Their shock was magnified by fear because of their diminished ability to pay due to loss of jobs, income, and businesses.

Add to that Meralco’s threat that they will start disconnecting power for unpaid electric bills by September 30, 2020.

House Energy chair, Marinduque Rep. Lord Allan Velasco, presented to Meralco the samplings of consumer complaints his office had received:

Unexplained and excessive kwh billing, estimated billings and Meralco’s failure to do meter reading, failure to credit payments that were made, increased billings even if their house was unoccupied, etc.

Meralco officials of course are unperturbed. They just need to labor through implications of organizational incompetence.

Their kwh reading will eventually be corrected and customer payments recorded.

ERC might be able to convince them to waive certain fees probably worth P100 million to pacify the public.

Meralco might agree to extend the disconnection period by another 30 days. (Enough time for you to mortgage your properties and ATM so you can pay their bill before Christmas).

Will these really meaningfully alleviate the consumer bills that skyrocketed to 3 or 4 times their normal bill? Do these really provide a solution for the “High Electricity Bills during the ECQ and GCQ Period”?

If the question eventually boils down to whether a Meralco customer is legally obligated to pay for electricity consumption that had registered in their meters, they will lose. And all ERC will be doing is to help explain things to the public and perhaps ask Meralco to spread the pain.

In the Zoom Meeting, MSK presented to the House Committee and to ERC Chair Devanadera, the issue of the imminent over-recovery by Meralco of its approved annual revenue and hence a violation of the regulatory limit on their PBR rate.

1. We tried to point out that Meralco has different DSM rates (distribution, supply, and metering) for different types of customers. In general, low income, regular customers, and large industrial and commercial customers. The DSM charge for those consuming 200kwh and lower is P1.88 per kwh. Those of regular customers consumer up to 5,000kwh is charged P2.98 per kwh. And those large industrial and commercial customers a low P0.82 per kwh. (Take note of the disparity)
2. These per kwh rates were based on assumed kwh sales to each customer class way back in 2013. If we assume that about 60 percent of Meralco kwh sales are consumed by the two residential groups, the 40 percent is consumed normally by the industrial group for which Meralco charges only P0.82 per kwh.

Just for your perspective, of Meralco’s 6.5 million customers, the large industrial and commercial group is less than 1 percent or 65,000 in total. But they consume 40 percent of Meralco’s energy sales.

3. Now during this ongoing Covid-19 pandemic, something happened that, as Chair Devanadera said, was “not envisioned when the rules were established.” Meralco’s sales to the large industrial and commercial customers dropped significantly by at least 75 percent due to the ECQ and GCQ lockdowns.

So, they lost a market for about 700 million kwh a month that they normally sell at P0.82 per kwh. Or P574 million a month.

4. On the other hand, because residential customers had to stay and work at home under ECQ lockdowns, their consumption increased by 50 to 150 percent in kwh.

Their April and May bills reflected these in addition to what Meralco claims are consumption under estimated from the average of the 3 cooler months of December to February. This is why some people saw their kwh consumption increase by 200 to 400 percent.

5. Where did the additional power, that we the residential customers consumed, come from?

Those were the power that Meralco used to supply to the large industrial customers and at the rate of P0.82 per kwh for distribution.

Now, they supplied it to us residential customers at the rate of P2.98 per kwh.  Suddenly, the industrial power that Meralco normally sell for P574 million, is now being billed at P2.086 Billion or a gravy revenue profit of P1.512 Billion per month. For the 2-1/2 months from mid-March to May, their windfall profit reached P3.78 Billion.

6. About 2 hours later, Meralco was ready to address the consumer groups’ issues including MSK’s revelation. Meralco’s response was classic Meralco deflection, hoodwinking, and denial.

If they say it enough and deny it enough with straight faces, it will eventually be accepted as true. You too would do it if billions in additional opportunity revenues are on the line.

7. Top Meralco regulatory lawyer Atty. Ronald Valles, said MSK’s allegation is wrong. He said Meralco has no “Maximum Approved Revenue” or MAR as pointed out by MSK. They have the kwh rates as approved by the ERC.

OK Atty. Valles it is not MAR, in Meralco’s case it is called ARR or annual revenue requirement. And a MAP (maximum average price) that is used to translate your annual revenue into kwh rates for each consumer group.

8. Atty. Valles further said that it is not true that the electricity that was supposed to be consumed by industrial customers at P0.82 per kwh was instead consumed by residential customers. He said MSK is wrong.
9. Ok. Here is what we know. Meralco power purchases based on its own records were 2.597 Billion kwh in March, 2.558 Billion kwh in April, and in May it was 2.541 Billion.

In the normal months of January and February it was 2.637 and 2.592 billion respectively.

10. No one of course will believe that the power consumption of Meralco’s large industrial customers did not drop significantly during the lockdown period when they are supposed to be closed.

In any case, if such P0.82 per kwh power was not supplied to the residential customers, the 50 to 200 percent increase of the consumption of these residents would have come from additional power supply and Meralco’s power purchases would have risen to more than P3.541 billion in May and not just P2.541 billion, (just to serve its residential customers).

11. It should be explained that when Meralco buys power from its various generators, they don’t distinguish purchases by consumer group.

All those power flow into one distribution grid and the consumer classification only depends on who consumed it.

12. Suppose Meralco bought 2.5 billion worth of power, it means normally, 500 million kwh will be consumed by small consumers, 1 billion by the regular residential and commercial, and 1 billion by the large industrial customers.
13. Under the ERC approved ARR and MAP rate translation, the 500 million will be charged at 1.88 per kwh, the 1 billion to residential and commercial shall be charged at P2.98 per kwh, and the 1 billion kwh for the industrial customers will be charged at P0.82 per kwh.

If the sales of Meralco stays as normal and Meralco is using accurate numbers, then the resulting total revenue should be about the level of the ARR or annual revenue requirement.

If they exceed this total, it means they are “over recovering” and must be ordered to refund. Or to reduce their rate in the next regulatory reset period.

14. MSK’s numbers are calculations and will not be exact as Meralco might claim.

However, the principle and conclusion would be valid.

Allowing Meralco to charge the normal P2.98 per kwh for power that should have been sold at P0.82 to industrial customers would result to an over-recovery that will run to at least P1.5 billion month, an overcharge that the suffering Meralco consumers cannot afford.

These are the right questions that need to be asked, not to Meralco, but to the ERC, which has the mandate under the law to protect the public interest and make sure that it’s approved ARR or annual revenue requirement limit are observed.

We appeal to Senate and House Committees on Energy to take cognizance of this violation of ERC’s approve revenue limit for Meralco.

Let us not allow the regulatory system to fail again our people as what happened in December 2013 when the ERC approved a one month jump of P4.15 per kwh in generation rates “because it is according to the rules.”

At the time, the Supreme Court had to intervene to protect the public interest.

Let us address the right issues and ask the right questions.

ERC is the right venue. For now.