Meralco denies it overcharged customers in 2004, 2007

Power distributor Manila Electric Co. (Meralco) on Wednesday belied charges that it had overcharged consumers in 2004 and 2007 by unduly including billions of pesos worth of property, equipment and expenses in the computation of power rates. "We maintain that we have not overcharged our customers," said Ivanna dela Peña, Meralco head for utility economics. She added that collections from more than four million customers for those years had been approved by regulators. "Our unbundled rates have been duly approved by the [Energy Rgulatory Commission] after extensive evaluation by the commission of the property we use and the expenses we incur in providing electric service," she said. She added that the company would come out with a more detailed statement on the allegations once they finish studying a report written by state auditors alleging overcharging. "We will closely study the COA report and submit our comments at the appropriate time," she added. ERC Executive Director Francis Saturnino Juan defended the utility, claiming that it had not overcharged its clients. "As far as the implemented rates of Meralco, there was no overcharge," Juan said. The Commission on Audit (COA) has said the country's biggest power distributor had generated P1.68 billion above what it should have fairly collected in 2004, and P5.33 billion more in 2007 due to a misapplication of its so-called unbundled rates. "Unbundling" involves breaking out the components of traditional bundled services — generation, transmission, distribution and supply — and assigning existing costs to service components, as well as developing prices based on these costs. In their report dated December 23, 2009 but released only on Tuesday, government auditors said Meralco should not have included in the computation of its rate increases P3.7 billion worth of property for 2004 and P3.5 billion in equipment for 2007. Meralco should also not have included a parking area almost a kilometer away from its office, as well as employees' pension and benefits worth P2.356 billion in the computation of its rate adjustment, the COA said. It added that certain operating expenses worth P3.48 billion and P2.92 billion for calendar years 2004 and 2007, respectively, should not have been charged to consumers since these had nothing to do with the delivery of power. State auditors audited Meralco's books pursuant to a Supreme Court ruling directing the Energy Regulatory Commission (ERC) to examine the utility's accounts to make sure a rate increase for 2003 was justified. The high court upheld the increase approved by the regulator, but ordered a review. This was not the first time that state auditors have found Meralco overcharging its customers. In 2003, the Commission on Audit discovered that the utility had overcharged its clients by 1.7 centavos/kilowatt-hour (kWh) by including income tax as an expense that it had passed on to consumers from 1994 to 2002. The Supreme Court subsequently ordered Meralco to stop this practice and to refund as much as P30 billion to consumers. The ERC, meanwhile, has been criticized for supposedly being powerless in preventing the power distributor's allegedly recurrent abuse. In 2003, the Freedom from Debt Coalition questioned the ERC’s approval of Meralco's provisional authority to raise rates by as much as 12 centavos/kWh. The high court, however, rejected the ERC ruling in January 2004 because it violated certain rules during its own hearings. In June 2004, Meralco again applied for an increase of 13.27 centavos/kWh through its so-called generation rate adjustment mechanism. The Supreme Court again junked the petition in February 2006, saying the utility had not followed the prescribed process. NPA, GMANews.TV