HOUSE OF REPRESENTATIVES Quezon City
FIFTEENTH CONGRESS First Regular Session HOUSE RESOLUTION No. 191 (filed August 10, 2010) _____________________________________________________________________________ _ Introduced by Reps. TEDDY A. CASIÑO and NERI JAVIER COLMENARES
RESOLUTION DIRECTING THE COMMITTEE ON ENERGY TO CONDUCT AN INQUIRY, IN AID OF LEGISLATION, INTO THE ENERGY REGULATORY COMMISSION’S (ERC) PERFORMANCEBASED REGULATION (PBR) METHODOLOGY THAT FAVORS THE CONTINUED UPWARD ADJUSTMENT OF ELECTRICITY RATES BY BOTH PUBLIC AND PRIVATE POWER CORPORATIONS TO THE DETRIMENT OF THE PUBLIC
WHEREAS, the Energy Regulatory Commission (ERC) approved the Manila Electric Company's (Meralco) application to set rates using the performancebased regulation (PBR) methodology in August 31, 2007; WHEREAS, the PBR method replaces the 80yearold Return on Rate Base (RORB) scheme, where rates are based on the assets used in generating electricity and a profit margin for the utility of about 8 percent; WHEREAS, under the PBR method the country's largest electricity distribution utility will be able to charge rates based on their projected investments and operating expenses. Meralco wanted a new system in place because under the RORB scheme, the utility could not get the maximum allowable return because the rates are based on historical data; WHEREAS, in using the PBR methodology, Meralco expects a “faster recovery of costs incurred in providing electricity service.” The ERC, in effect, granted Meralco further leeway to hike its already astounding profit margins. Meralco’s net profit climbed 21% in the second
quarter of 2010. For the first half of the year, Meralco's net profit jumped by 51% from a year earlier to P4.85 billion; WHEREAS, after earning a huge profit, on June 18, 2009, Meralco went to the ERC to file a petition seeking approval for its “annual revenue requirement and performance incentive scheme” which would have the effect of raising its distribution, supply and metering charges at least once every year from 2012 up to 2015. This Meralco rate hike petition comes after two successive ERCapproved increases in May 2009 and May 2010 as well as another increase next year; WHEREAS, three weeks earlier, Meralco announced it earned P2 billion in profits during the first quarter of 2010, or 135 percent more than its profits for the same period in 2009; WHEREAS, the Philippines has the highest electricity rates in Asia after Japan, proving yet again that the privatization of the country’s power assets have not resulted in lower electricity rates. The ERC decision to use the PRB methodology of rate determination only gives an annual heavier burden on the predominantly poor public; WHEREAS, under the PBR ratesetting regime, for the specific regulatory period of 20122015, Meralco has detailed in their application their speculative market assumptions and their planned capital expenditures for expansion, upgrades, repairs and additional infrastructure. Meralco’s pending application with the ERC for the updating of its PBR tariff to P1.6464 per kWh for year 2011 is higher by P0.1547 per kWh from this year’s approved rate of P1.4917 per kWh; WHEREAS, to make matters worse, even the National Power Corp. (NAPOCOR) and Power Sector Assets and Liabilities Management Corp. (PSALM) have pending petitions for the “recovery of incremental fuel and independent power costs under the Generation Rate Adjustment Mechanism (GRAM)” and for “the recovery of incremental costs on foreign exchange rate fluctuations under the Incremental Currency Exchange Rate Adjustment (ICERA).” All this comes on top of an approved “revenue requirement” covering the period 20062009 of the National Grid Corp. of the Philippines; WHEREAS, any upward adjustment in electricity rates will only further burden the consuming public who are long suffering from low wages, jobless periods and skyrocketing prices of oil, water and other basic goods and services; NOW THEREFORE BE IT RESOLVED, that the Committee on Energy conduct an inquiry, in aid of legislation, into the Energy Regulatory Commission’s (ERC) PerformanceBased Regulation (PBR) methodology that favors the continued upward adjustment of electricity rates by both public and private power corporations to the detriment of the public. Adopted,
REP. TEDDY A. CASIÑO Bayan Muna Partylist
REP. NERI JAVIER COLMENARES Bayan Muna Partylist