P11B refund, rate rollback shock Meralco monopoly
FOR the past four years, the utility giant Manila Electric Company (Meralco) has been gouging millions of captive electricity consumers, in the process amassing some P11 billion from bloated billings.
Thus ruled the Energy Regulatory Board after an examination of the power firm’s books by the Commission on Audit. The ERB ordered Meralco to refund the overbilling within a year and to roll back its present rates by 16.7 centavos per kilowatt-hour.
Spread among its more than 3 million customers, the refund would amount to about P1,700 for a small household using 200 kwh a month, and more than P4,000 for those using 500 kwh.
The ruling confirmed the gut feel of harassed consumers that Meralco has been bleeding them. Electric bills have been observed to be growing bigger without the household adding any new appliance or bulb to its current usage.
The refund-rollback order may have given Meralco a severe electric shock, but the Lopez-controlled monopoly is certainly going to fight back. Many consumers are bracing for the return of brownouts.
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HOW did Meralco amass that huge pile?
The COA discovered that Meralco has been passing on to consumers its income tax payments. The generally low-income consumers — who sometimes have to suffer disconnection when they cannot raise money fast enough to pay their bill — were the ones shouldering the gargantuan income tax of a blue chip corporation.
The power firm did this by including its income taxes in its operating expenses, which results in a distorted figure for net profits.
The COA discovered also that Meralco has been bloating its assets to raise the ceiling on its allowable profits. The law limits to 12-percent the utility firm’s return-on-rate-base (RORB), but creative accounting has enabled Meralco (according to COA) to come up with a 20-percent RORB.
RORB, a measure of profitability, is net income divided by the assets used in distributing electricity.
The bigger the divisor (assets), the smaller is the computed profits. And the smaller the profits appear to be, the better for a company trying to show that it is working within the allowable 12-percent profit bracket.
The COA discovered that Meralco included in its list of asset some property that had nothing to do directly with power distribution, its main business. This supposedly padded its assets used in computing RORB.
The assets listed included the Meralco theater, Jollye Recreation Center. John F. Cotton Hospital, and Computer Information Building. Other companies owned by the Lopez family were also reportedly using these properties.
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THE energy board that dared to call down the giant firm after years of debate appears to have a new outlook because of its new membership. The old board routinely granted Meralco the rate increases it had applied for.
You might know some of these ERB members who voted for a refund and a rollback: Neptali Franco (chairman), Melinda Ocampo and Artemio Magabo. A fourth commissioner (former COA auditor Bernarda Lavisores) abstained. The fifth ERB seat is still vacant.
Some sectors have demanded that the old board members be called to account for their failure to cut down Meralco’s overbilling over the years. Their detractors say they were either incompetent or in cahoots with the utility firm.
Meralco is in fact harking back to the favorable rulings of the old board, saying that its rates and computation of its RORB had been approved by the previous ERB. It adds that it is questionable for the ERB to reverse its old rulings long after they had been implemented.
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ASIDE from the staggering effects of a refund and a rollback on the business, these are some of the questions and implications:
- Is a refund enough, or should Meralco be ordered to pay interest on the overbillings? Or should some people go to jail?
- Should not the government now also go after other utility companies, including oil, telephone and water firms, that are generally believed to be bleeding the consuming public?
- Is the attack on Meralco a ploy of the Ramos administration to curb the Lopezes’ supposed inclination to support the opposition in the May elections?
- Will the Lopez media, particularly ABS-CBN, be professional and objective in handling the Meralco issue, or will the vast network be used to back Meralco and attack the administration?
- Should Meralco’s accountants also be held liable for their controversial handling of the company’s books?
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MANILA EMAIL: Reader Joseph F. Pisco writes: “…when things are going well, the government loves to take credit for it, and when the bottom falls out, is blamed for it. Both are questionable. Government does little to create wealth; people/business do. Bad government can kill a healthy economy. I am afraid this meltdown has little to do with government, although you are probably right that Speaker De Venecia could be (unfairly) hurt by it.”… Another from Leyo Bautista: “ ‘Tinimbang Ka Ngunit Kulang’ was not a Nora Aunor movie; it was Boyet de Leon and Lino Brocka, also Hilda Koronel yata, who were in that film.’… Jun U. Silva: “With Manila Mail, I feel like I have a friend updating me on the latest to-do back home. Your light treatment of ponderous issues and bloated egos is truly engaging.”