(Article published in the May12,2003 issue of TODAY, Business Section)
Supreme Court has spoken and with finality. Whether right or wrong,
its decision in the case of Republic
of the Philippines, represented by the Energy Regulatory Board v. Manila
Electric Company, G.R. 141314, promulgated November 15, 2002
(reconsideration denied with finality on April 9, 2003), must be
respected. Consequently, MERALCO must either refund to its customers
or credit in their favor for future consumption the excess average amount
of P0.167 per kilowatthour starting with MERALCO’s billing cycles
beginning February 1998.
legal logic of the Court is impeccable. Given the premise that, on
account (a) of the inclusion of the income tax as one of the operating
expenses and (b) of the use of the “trending method” of valuing the
assets used in the business for the purpose of determining the rate base
(extremely esoteric terms which need not be understood for purposes of
this piece), MERALCO overcharged its customers starting February 1998 by
an average of P0.167 per kilowatthour, then the inexorable conclusion is
that MERALCO must return to its customers what it has overcharged.
It is but only meet and just that the customers who were overcharged be
given back what was wrongfully (not necessarily with malice) taken from
like most syllogistic conclusions derived from abstract majors and minors,
the order to refund is most simple in theory but extremely complex in
practice. The thrust of this piece is to identify three major issues
which render it most impracticable, if not almost impossible, to comply
with the Court’s order to either refund or credit P0.167 per
kilowatthour and to suggest a more doable method of righting the scales
which the Supreme Court, rightly or wrongly, has ruled to have been
1: How do you determine the amount of the overcharge for each
first difficulty with the refund order is suggested by the tenor of the
order itself. The Court recognizes that the P0.167 per kilowatthour
overcharge is simply an “average”. It is the ratio of
MERALCO’s “Excess Revenue” (which is that part of MERALCO’s income
that was due to the inclusion of the income tax as part of its operating
expenses and the use of the “trending method” in determining the
amount that it can charge per kilowatthour in order to enable MERALCO to
attain the statutorily allowed 12 percent return on invested capital) over
(or divided by) the money it received from the total kilowatthour it sold.
During the “test year”, i.e. the year which the Commission on Audit,
on instructions of the Energy Regulatory Board, examined, the “Excess
Revenue” was calculated at P2,448,378 and the money from the total
kilowatthour used was shown to have been P14,640,094,000. Divide the
first by the second and you get the “average” per kilowatthour of the
problem is that the “excess average amount”, which is just a
mathematical construct is very much like the “common man” which is a
mere figure of speech. It is just as impracticable to find in flesh
and blood the customer who was made to pay this “average” as it
is to find a “common” man. Not all of MERALCO’s customers pay
the same amount for every kilowatthour used. There are residential
users paying residential rates. There are industrial users paying
industrial rates. Moreover, the so-called “socialized pricing”
of electricity results in some customers who are paying less than others
while others are paying more than some. Thus, it is quite possible
that the subsidized users were overcharged less than the average and those
customers who were shouldering the subsidy were paying more than the
average. If this is so, then it is clearly unduly benefiting the
subsidized user if he were refunded an amount based on the “average”
when in fact he, if at all, was overcharged less, and it is obviously
unjust to the one who bore the cost of the subsidy to receive a refund
based on the “average” overcharge only when in fact he paid more.
2: Who are the MERALCO’s customers to be given refunds, the present or
Court’s order was to give a refund to or credit against the future
consumption of, in the Court’s own words, “MERALCO’s customers”.
The period covered is from the billing cycle that started February of 1998
to, I assume, the day on which the resolution denying MERALCO’s plea for
reconsideration with finality becomes final.
problem is that those who were customers in, say 1999, may not be the same
customers when the refund is paid. In fact, some may be customers in
1999, but not in 2000 (because they went to the province covered by a
different franchisee), a customer again in 2001 and, because he sought and
got employment abroad, ceased to be a customer in the middle of 2002.
The point I am making is that while “customers” may be
changeless conceptually, it refers in reality to a continuously changing
mass of people. It is thus like a river, which appears to be one and
the same for ages, but which in reality is made up of different
biological, chemical and ecological elements from moment to moment.
Obviously, the Court did not intend to refund to a new customer in 2003
what was overcharged against one who was a customer in 1998 but who is no
longer a customer beginning in 2002.
assuming the individuals and entities comprising the “customers” are
constant (or at least identifiable throughout the refund period) a further
question arises with respect to current practice, tolerated and even
encouraged, which allows for one person to be the registered subscriber to
the service of MERALCO and another to be the person who actually uses and
pays for the electricity. An example is the situation of a lessor
and a lessee of a residence. Ordinarily, the MERALCO meter is
registered in the name of the lessor; but in practice, the lessee is the
person who uses and pays for the electricity. Clearly, the refund
should be to the person who was overcharged and that is the lessee.
But MERALCO has no record of the lessee’s identity (and often does not
even know of his existence). Is the refund to be made to the lessor
who is the “customer” of record and not to the lessee who, in equity,
ought to be the one made whole?
No. 3: Who really bore the burden of the overcharge?
ordered refund is founded on the logic of restitution: he who was
wrongfully deprived of some property must be given back what he lost.
The above described situation of the lessor-customer-of record-and the
lessee-actual-user-and-payor raises the broader issue of the incidence of
the overcharge. Most electricity brought from MERALCO was and still
is bought by businesses which, in the natural order of things, pass on the
cost of the electric power to other people. Power is an input of
production and distribution that is imbedded in the cost of the goods and
services purchased by the consumers. In instances where the market
is unwilling to absorb the cost of power as part of the purchase price,
the managers of businesses pass it on to other stakeholders, such as, the
labor group (which, for instance, absorbs the cost in the form of lower
salaries and lesser benefits), the providers of other inputs, such as the
suppliers who were asked for greater discounts to off-set the power cost,
or the bank creditors, who, in the particular case of major enterprises,
have had to cut their interest rates, or even the shareholders who by the
same token receive lesser dividends.
the final analysis, most of the real payors of the overcharge were those
who could not have shifted the burden to others. They are the
economically poor and the financially disadvantaged, the many who could
not even get, on the basis of their income and asset profile, a connection
to MERALCO’s transmission lines. These are the ones who ought to
benefit from the refund since they are MERALCO’s real
“customers”, the ones who bore the brunt of the overcharge because
they were powerless to pass it on to others.