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Meralco to defend price hike before SC

MANILA, Philippines – It's the turn of the Manila Electric Company (Meralco) to respond to accusations of inflating generation charges it passed on to customers.

On Tuesday, February 4, Meralco will defend before the Supreme Court (SC) its record-high power rate hike. Retired Justice Florentino Feliciano and Atty. Victor Lazatin will be arguing for Meralco.

The distribution company previously asserted that it was just collecting from its customers the charges that power firms from the Wholesale Electricity Spot Market (WESM) billed, adding that "it does not derive a single centavo of profit" from the rates.

Tuesday's oral arguments before the SC is a continuation of the January 21 debate, where petitioners argued that Meralco helped jack up prices in the spot market by ordering the sale of its contracted power with power generation company Therma Mobile Inc. of the Aboitiz group at high prices. Meralco and Therma Mobile have a power supply agreement (PSA) allowing Meralco to buy 100 megawatts of power at P8.65/kWh. 

During the first day of oral arguments, Bayan Muna Rep. Neri Colmenares said that Therma Mobile sold power at WESM at P62/kWh, the ceiling price at WESM at the time. WESM prices fluctuate on an hourly basis, depending on bids offered by suppliers. (READ: Meralco inflated charges, SC told)

'Not our fault'

Meralco's legal counsel has since appeared in a hearing before the House of Representatives, saying the inflation of prices was not deliberate. The company instead blamed government-controlled power generator Power Sector Assets and Liabilities Management Corporation or PSALM.

PSALM owns the Malaya thermal power plant in Rizal that lawmakers said could have brought down power prices if dispatched during the shutdown of the Malampaya gas field.

Meralco sourced its power requirements from WESM after the scheduled maintenance shutdown of the Malampaya, its main power source, and the simultaneous outages of the power plants of firms it had PSAs with.

During the shutdown of Malampaya, all power generators were required to sell in the spot market and offer a price. Meralco said they asked Therma Mobile to offer high rates as a matter of strategy, wanting to make sure there would be no takers as it needed the contracted power supply.

Colmenares, during the House hearing, said the recurring sale of the contracted power casts doubt on Meralco's claimed lack of guilt. Therma Mobile allegedly sold the contracted power 25 times at the ceiling price of the spot market.

.DEBATE. The debate continues on Meralco's controversial power rate hike. File photo by LeAnne Jazul/Rappler

Debate issues

Among the issues to be debated before the High Tribunal are:

Issue #1: Whether or not petitioning the High Court was the appropriate remedy for the issue

Issue #2: Whether or not the cases and issues raised can be tried in court

Issue #3: Whether or not the Energy Regulatory Commission (ERC), in its approval of the rate increase, committed grave abuse of discretion

Issue #4: Whether or not the amendment to Section 4(e), Rule 3 of the Electric Power Industry Reform Act (EPIRA)'s Implementing Rules and Regulation allowing automatic rate adjustments or increases to recover generation costs violates due process and the declared policy of the EPIRA

Issue #5: Whether or not the automatic rate adjustments or increases to recover generation costs amount to a surrender of ERC's regulatory functions

Issue #6: Whether or not Sections 6 and 29 of the EPIRA law are unconstitutional in declaring that (a) power generation and supply are not public utilities, and (b) their charges are beyond regulation by the ERC

Issue #7: Whether or not the Temporary Restraining Order (TRO) in this case should be lifted

Issue #8: Whether or not the Petitioners are entitled to the reliefs requested, including a refund of the paid charges