Beginning this month, the government begins rolling out its Lifeline Rate (LR) program that will aid low-income households in paying their electricity bills.
The LR program provides for a subsidized rate to qualified low-income electricity customers who cannot pay their electricity bills at full cost. This is a good example of government granting “ayuda” to the marginalized segment of society.
Beneficiaries of the Pantawid Pamilyang Pilipino Program or those living below the poverty threshold set by the Philippine Statistics Authority can apply for the program. Only one application for each household will be granted with the lifeline rate.
To apply for the program, beneficiaries should submit to the Distribution Utility (DU), or the Electric Cooperative (EC), their duly accomplished Lifeline Rate application forms, most recent electricity bills, and any valid government-issued identification cards with the signature and address of the applicant.
Is the grant of this ayuda benefit the appropriate response to the increasing electricity bill burden of our marginalized Filipinos? I argue that there is a better solution for the woes of practically all households and consumers.
I say that the better response is for the Energy Regulatory Commission (ERC) to finally rule on the refund of the over-collections from electric billings of the DUs and ECs. These over-billings have been arising for several years already, and it is incumbent that these excess collections be returned to the consumers.
I present the following undisputable facts, using Meralco as the test case.
1. Meralco billing rates have remained provisional and unchanged since 2012.
2. The electricity rate reset process for the period 2012 to 2022 has not been completed. The reset for 2016 to 2022 has not even started.
3. There was an error in the calculation of provisional rates.
4. In the absence of a completed rate reset, the ERC allowed rates for Meralco were only provisional or interim rates subject to further adjustments after the completion of the process.
5. ERC made a partial correction of the error in 2022 resulting in four refund orders totaling P48 billion.
The above shortcomings are expected to result in over-recoveries amounting to about P160 billion. ERC is still validating the over-recovery balance of about P112 billion.
Annually, a liability for possible over-recovery is recognized by Meralco in its financial statements. At the end of 2022, the liability had a net balance of P101 billion.
Once the error is fully corrected and the validation completed, monthly power costs will be reduced by the estimated amounts shown below. In addition to this, a further reduction in monthly power costs is expected after ERC issues an order for the refund of the over-recovery balance.
Meralco recently announced an imminent increase in power costs due to increasing fuel costs of generation. With the increases in the prices of other commodities, the impact on consumers will be significantly alleviated by the timely ERC decision on the above.
The ERC decision could also reduce consumer power bills from the other 20 private distribution utilities all over the Philippines, which followed the same process as Meralco.
The grant of “ayuda” and re-scheduled payments are welcome relief, but returning the over-collected consumer funds does a lot more to preserve the dignity of consumers.
Alfredo Non is a CPA by profession and a former Partner at SGV & Co. He served as Commissioner of the Energy Regulatory Commission till he completed his term in 2018. He also served as Director and Executive Officer of several private companies and a former professor in Financial Management at the Ateneo Graduate School of Business.