Consumers thrown under Agnes’ bus

Consumers thrown under Agnes’ bus | Daily Tribune

Electricity consumers have been enduring inefficient service that is among the most expensive in the region, partly as a result of regulatory capture in the past.

Under the Electric Power Industry Reform Act, or EPIRA, which governs the energy industry, the Energy Regulatory Commission has the sole mandate to oversee the performance of power utility firms.

During the previous administration, consumers rated the ERC a complete failure under Agnes Devanadera, a political survivor recently recycled as Clark Development Corp. president and chief executive officer.

Instead of protecting the consumers’ welfare, the regulatory capture that pervaded meant that big businesses were able to attain their aim of maximizing profits.

Advocacy group Power for People Coalition convenor Gerry Arances said Devanadera should be “facing hearings and complaints” for allegedly not fulfilling her obligations as the head of the energy regulator instead of being retained in government.

“She failed consumers in her post as ERC chair,” he said.

“From policies on power procurement that remain unfair to renewables to the lax imposition of penalties on fossil companies for anomalous services, Devanadera had proven herself to be an ally of coal, gas, and other dirty energy,” he added.

The recent power outages, the worst of which hit Western Visayas at the start of the year, can be traced to the lethargy of ERC under Devanadera.

Among the serious missteps during her term was allowing power firms, particularly grid operator National Grid Corp. of the Philippines, to do without backup electricity through firm ancillary services contracts.

Consumer groups also lamented the turtle-paced computation of power firms’ allowable returns on their businesses.

The computation of the weighted average cost of capital, or WACC, which is a determinant of the maximum annual revenue (MAR) allowed on electricity utilities, had not been updated, which the current ERC administration is now working on.

The WACC and MAR fixed NGCP’s yearly profit, which had soared since it acquired its contract from the government in 2009.

Dragging its feet in recomputing the allowable net income for NGCP indicated that Devanadera had surrendered her mandated task. Her usual alibi in being coopted by giants in the industry was that ERC had inadequate resources to resolve issues.

She even gave NGCP an “interim” MAR to keep its profit margin beyond the norm in the region.

The WACC comprises around 66 percent of the MAR for local power utilities, and the other figures, such as the return of capital, operations expenses, and taxes, make up 34 percent.

Industry estimates indicated NGCP’s WACC should have been adjusted in 2016 to about seven percent, which is the regional average, instead of the 15 percent during the ERC regime under Devanadera.

A WACC reduction of seven percent means P53.3 billion in excess NGCP charges since 2016 should be returned to electricity users.

All of this took place under the watch of an ERC chief whose eyes seemed glued to an expensive lid.