SC told: Rate hike violates consumers' right to due process
MANILA - The Energy Regulatory Commission's (ERC) clearance for Meralco to collect its unprecedented P4.15 per kilowatt hour (kwh) rate adjustment deprived consumers the opportunity to examine the basis for the adjustment, and deprived consumers their right to challenge the rate hike.
So argued petitioners before the Supreme Court (SC) magistrates during the first day of oral arguments into consolidated petitions questioning the rate increase.
Atty. Leonard De Vera, lawyer for petitioner National Association of Electricity Consumers for Reforms (Nasecore), urged the high court to strike down the automatic rate adjustments or increases to recover generation costs as unconstitutional for being violative of consumers' right to due process.
"The notice, the publication of adjustment of rates, cannot be dispensed with because that's the essense of due process," De Vera said.
One of the main arguments of petitioners in their separate petitions is that there was no due notice, hearing, and publication made by Meralco and the ERC for the proposed P4.15 per kwh rate increase, and that the increase not only shocked consumers but also deprived them the right and opportunity to question it.
De Vera cited a ruling handed down by the high court in 2006, in a petition also filed by Nasecore, that pointed out a violation of due process by Meralco when it "passed on to the consumers the adjustment in generation rate without publication."
"The Supreme Court said... the notice, the publication of adjustment of rate cannot be dispensed with because that is the essence of due process," De Vera argued.
GENERATION COMPANIES BLAMED
Bayan Muna Rep. Neri Colmenares, one of the petitioners, told the high court that that unprecedented rate increase was brought about not by an actual "substantial increase in the cost of producing electricity," but because generation companies (GenCos) "exploited the highly suspect simultaneous unscheduled and scheduled shutdown to make staggeringly high bids in the spot market called WESM."
"Respondent ERC committed grave abuse of discretion amounting to lack of jurisdiction when it hastily approved without a hearing and investigation, the P4.15 rate hike imposed by respondents Meralco and GenCos despite three highly irregular or unprecedented events which should have stayed its hands of approval as market abuse regulator," Colmenares said.
These events, according to Colmenares, are the following:
- the rate hike is the largest electricity rate increase ever in the country;
- the occurence of simultaneous shutdowns of many plants, at least 6 scheduled shutdowns and 8 unscheduled shutdowns of plants; and
- Meralco, through its contract with Therma Mobile, also a respondent in the case, made P62 bids in the WESM, the highest possible bid, during these simultaneous shutdowns, thereby increasing the price of electricity Meralco bought in the WESM.
Colmenares said Meralco was guilty of price manipulation, to the detriment of its consumers.
"These acts... are antagonistic to the interest of Meralco's customers, and in violation of Meralco's duty under Sec. 4 of its franchise which provides that Meralco 'shall supply electricity to its captive market in the least cost manner,'" Colmenares said.
"Your Honors, if only for this, the ERC should have declared void the P4.15 increase," he added.
'ONLY WINDFALL PROFIT AFFECTED'
Colmenares also hit respondents' argument that "unless automatically passed through, the GenCos will lose substantial amount" which may even greatly impact energy supply.
"The substantial increase of P4.15 in December on top of the already unjust 1.07 increase in November, was not brought about by a substantial increase in production cost but was mainly brought about by the very high bids in the WESM by Meralco and GenCos intending to make a killing at the expense of the people.
"This simply means that the GenCos trading in the WESM produced the same amount of electricity at substantially the same production cost but at double the price," Colmenares argued.
Colmenares insisted that halting the rate hike will not result to bankruptcy on the part of GenCos, rather, will only deprive them of windfall profit.
"It does not threaten to deprive them of capital or reasonable profit, but only windfall profit," he said.
Colmenares said the ERC failed to perform its duty as market abuse regulator by "hastily" approving the rate adjustment in spite of this.
"The people will never understand respondent ERC's penchant to hastily and automatically approve rate hikes as if the energy sector will crumble if the same is not immediately granted, despite the fact that there are other methodologies of pass through processes in many countries that are not automatic but did not result in bankruptcy for the GenCos and [distribution utilities]," he said.
EPIRA PROVISIONS UNCONSTITUTIONAL
Bayan Muna Rep Carlos Zarate, also a petitioner in the case, urged the high court to strike down as unconstitutional Sec. 6 and 29 of the EPIRA Law, which declare that (a) power generation and supply are not public utilities; and (b) their charges are beyond regulation by the ERC.
Zarate said this is necessary in the resolution of the case because these deal with the ERC's regulatory authority.
"EPIRA's mandate, as contained in Sec 6 and 29, for the State to abandon its power to regulate the excessive impositions of power generators and suppliers, is clearly unconstitutional as the same will not be for the common good of the Filipinos, the consumers particularly.
"This is in fact the very crux of the matter. These problems that the millions of Meralco consumers are facing now is driven by the fact that prices imposed by generation companies and suppliers of electricity are not subject to regulation by the state, as these sectors are no longer considered public utilities," Zarate argued.
He also hit the "post-verification" authority by the ERC of power rate hikes, pointing out that this renders the agency and the state, in general, inutile in regulating rate hikes.