COA unearths Meralco's 'overcharged' expenses; power rates to go up

Wednesday, 17 February 2010 04:39 PM Merck Maguddayao

The Manila Electric Company (Meralco) “overcharged” its operating expenses by P6.4 billion, generated “excess revenues” amounting to at least P7 billion, and had P7.2 billion worth of properties and equipment which were “not useful” in the company's distribution operations in 2004 and 2007, according to a report released by the Commission on Audit (COA).

The audit report was submitted yesterday by COA to the Energy Regulatory Commission (ERC).

Dissecting the figures

On Meralco's P6.4 billion operating expenses, COA explained that the amount was at P3.479 billion in 2004 and P2.916 billion in 2007. This amount was “not considered chargeable from consumers as they were are not needed in the delivery of distribution services; hence, charging consumers for them is unreasonable,” Business Mirror Online quoted COA as saying.

On the P7.2 billion worth of property, COA revealed Meralco had a “P526.2-million creek and a P156-million parking lot,” and a “pension cost” of P2.4 billion. In a Business World Online report, COA said "It is not rational for Meralco to have a parking area almost a kilometer away from the Meralco office. It was implied that when an ocular inspection was conducted, [the] parking area within the rate base was not fully occupied." Meralco's P7.2-billion property was pegged at P3.7 billion and P3.59 billion in 2004 and 2007, respectively.

On the P7 billion “excess revenues” of Meralco, COA stated in a Philippine Daily Inquirer Online report that “the excess profit was traced to certain factors and items that should not have been included in the computation of Meralco’s revenues.” According to COA, Meralco earned P1.68 billion in 2004 and P5.33 billion in 2007 in “excess.”

COA stated in Business Mirror that the “reasonable” rate-of-return of Meralco's charges is at 12 percent. In 2000, the ERC approved a 15.5 percent rate-of-return for Meralco.

Findings to “help” ERC

According to ERC executive director Francis Saturnino Juan, the audit report will help it to “discharge its regulatory functions.”

"Ultimately, it will be the commission that will pass upon the allowable rates of Meralco, but of course, we will look into these findings after giving all parties the opportunity to comment. If the decision of the commission is to consider all or some of the findings of COA, then there will be an impact on [Meralco’s] rates," Juan said in Business World Online.

Furthermore, Juan said in Philippine Daily Inquirer that the P6.4 billion “overcharged” operating expenses of Meralco “may be refunded to consumers, should the commission decide to uphold the conclusions made by the audit agency.”

Power rates to increase

In a Philippine Star Online article, Juan said that power rates in the entire country will increase due to higher generation cost in distribution utilities. Juan added that the increase “will be imposed on end-consumers.”

The projected power rate increase is at P3.38 per kilowatt-hour in Luzon, P4.71 per kilowatt-hour in Visayas, and 15.55 centavos in Mindanao, according to ERC. It added that the National Power Corp. (NAPOCOR) has filed “several recovery cost application” on its generation rate and international currency rate.

With this, Department of Energy Secretary Angelo Reyes said that Luzon is assured of “uninterrupted power” until June 2010.

Meralco is the biggest power distributor in the Philippines.

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