THE Energy Regulatory Commission (ERC) on Friday said that no law limits the allowable rate of return for power distribution utilities.
The statement was issued in response to news reports and online posts about a complaint filed with the Office of the Ombudsman, alleging that the ERC’s approval of a rate of return exceeding 12 percent for Meralco violates the law.
“We understand why any suggestion of overpricing draws concern, and we take that concern seriously, but the public deserves an accurate picture of the law. There is no 12-percent ceiling that this Commission ignored. What exists is a rate-setting methodology that this Commission has applied consistently and lawfully, and which was reviewed, consulted on, and upheld by the Supreme Court,” ERC Chairman and CEO Francis Saturnino Juan said.
“We will address the complaint fully before the Ombudsman if we are asked to. In the meantime, we did not think it right to let a mistaken legal premise stand unanswered in the public record,” he added.
The 12-percent figure cited in the complaint was from a 1993 Return on Rate Base (RORB) case involving Meralco that had been decided years before the Electric Power Industry Reform Act (Republic Act 9136) took effect, ERC pointed out.
The percentage rate was set aside when the ERC shifted the industry from RORB to Performance-Based Regulation (PBR) in 2003 for transmission and in 2004 for privately owned distribution utilities.
“Under the PBR, the relevant measure is the Weighted Average Cost of Capital (WACC), an internationally accepted methodology. It is also not a reproduction of the old 12-percent figure. Our shift to WACC-based regulation went through extensive public consultation, and the resulting rate determinations have long attained finality,” the ERC said.
The regulator added that it had approved WACCs well above 12 percent for numerous distribution utilities and for the National Grid Corp. of the Philippines, including determinations for Meralco itself.
The law provides specific remedies for parties who disagree with an ERC rate determination: a Petition for Review before the Court of Appeals, or a Petition for Review on Certiorari before the Supreme Court.
Using the Ombudsman’s investigative powers as a substitute forum for a rate dispute would divert both institutions from their mandates at the public’s expense, the ERC said.