EXPLAINER: Passing on charges to Veco consumers baffles councilors. ERC says it’s the law. Chamber of Commerce asks, compare power cost with other regions, Veco bill with Meralco bill. 7 takeaways.

·6 min read

SUMMING UP: How the Cebu City Council public hearing last Wednesday, April 6 must have impressed the public on the problem of increasing cost of electricity sold by franchise holder Visayan Electric Co. (Veco):

[] From questions asked by Minority Floorleader Nestor Archival Sr. and Jocelyn Pesquera, a number of councilors don’t know the law on power regulation or don’t agree with how it is justified, or they just want to highlight the “unfairness” of the law that burdens their constituents. Archival apparently distrusts Veco’s compliance with regulations and ERC’s track record.

[] ERC officials who spoke before the Sanggunian by zoom appeared as defenders of Veco because of the absence of any representative of the power distributor. They dwelt more on the law and less on possible lapse in regulation that may explain Veco cost being higher, as the Cebu Chamber Commerce & Industry (CCCI) contends, than the price billed by other power firms in the country.

[] ERC may have long sat on its job of explaining to Cebu’s business community and the city Sanggunian, given the note of impatience in the plea of CCCI immediate past president Felix Taguiam

that ERC “finally” answer the chamber’s and, this week, the City Council’s questions. Taguiam spoke after the Q&Q segment between the councilors and the ERC officials.

Here are seven takeaways on the hearing and related side issues:

[1] VECO RIGHT TO PASS ON CHARGES. The councilors were baffled by the practice of power distributor Veco to tack on the cost of business to the electricity bill it sends monthly to consumers. Veco, as all other electricity firms, is exempted from taxes except income taxes, ERC said. Whatever expense it incurs -- such as systems loss, “missionary” charges and senior citizens subsidy -- it puts on the bill.

Councilor Archival counted 21 charges in the Veco bill. CCCI’s Taguiam asked rhetorically why Veco’s bill is much longer than Meralco’s. The number of add-on charges must partly explain that. And what a publicist once said, perhaps Veco wants “to list the things where our payment goes, transparency.”

Councilor Archival said the “pasahay” is unfair. Councilor Pesquera said other businesses such as airlines and pharmaceuticals don’t make their customers pay for all the costs. Wait, most likely those businesses do; they just don’t list them down in their ticket or receipt.

[2] EXTENT OF CHARGES; ‘HANDS TIED.’ The ERC officials. of course, cited the law as legal basis for Veco’s charges: the Electric Power Industry Reform Act or Epira (Republic Act #9136 of 2001). Under the law, an ERC official told the Sanggunian, Veco as distributor is entitled to “full recovery of costs.” That enables the distributor to provide the service required by its franchise.

“Our hands are tied,” the ERC official said, the law allows the charges to be passed on to the electricity consumer.

[3] PROBLEM OF REGULATION. The charging has cap or limit on amount, such as a claim for systems loss, or return on business investment. The law says “just and reasonable costs” and “reasonable return” so the company can “operate viably.”

Who determines whether the expense can be charged? Councilor Archival asked. Obviously, the power company, which the ERC oversees under its power to regulate. The problem is when the public – through its surrogates such as the City Council and the chamber of commerce – questions ERC capacity and/or zeal to do its job.

Archival wanted to be sure if the generating charge is actually paid to by distributor Veco to the generator. He came close to saying, I want to be sure of the amount and the amount is actually paid out. He didn’t say that but he asked for receipts. One ERC official, you want each consumer to see the receipts eevery month when they get the bill? No, Archival said, but to us (councilors) as we represent those consumers. He wasn’t asked if the City Council had the time and skill to do go over the receipts and view it in the light of existing laws and regulations.

The problem of distrust in the regulators is compounded by the amount of work needed to regulate. An ERC official said there are about 140 electricity firms in the country; Veco, though the second largest, is just one of them.

[4] LONG WAIT FOR ANSWERS. The volume of work in ERC’s hands may explain why it took so long for the agency to respond to requests for information and action on complaints.

Restiveness over high energy cost, compared to the price in other parts of the country, has sizzled for some time in Cebu.

CCCI’s Taguiam told ERC officials last Wednesday he and the chamber have long been waiting for ERC action (“we want to talk with ERC people who decide”) and hoping it will finally come. The Sanggunian began taking up the issue in 2020, seeking for the ERC’s side, which came only last Wednesday, unsatisfactory as it was to CCCI and the councilors.

[5] PAST ATTEMPTS TO FIND OUT. Last December 7, 2020, the chamber of commerce asked the help of the Regional Development Council to make Veco explain its high cost of electricity. The stiff price of power is hurting the city’s business competitiveness. CCCI research of all power utilities ranked Veco as “one of the most expensive power distributors in the country.” More than 50% of its total power demand, CCCI alleged, is sourced from “associated firms,” a violation of the law.

On May 5, 2021, the Cebu City Council tasked its committee on energy to discuss with Veco and CCCI officials and local consumer groups “the growing complaints” against the rise in electricity bills.

Last Wednesday’s Sanggunian talk with ERC officials showed that the problem is far from solved. CCCI’s Taguiam said the disparity in power costs is increasing.

[6] SPOT THE DIFFERENCE: VECO, MERALCO BILLS. CCCI’s Taguiam suggested that ERC resolve its complaint – long unresolved, he claims – by simply comparing a Veco bill with a Meralco bill. He didn’t specify the differences but on top must be the number of add-on charges in Veco’s charges.

Taguiam also asked that they look at the electricity cost in Cebu and compare it with other regions. The gap is getting wider, he told ERC officials last Wednesday.

For the Cebu public to assess the situation and for the City Council’s informed judgment, the CCCI may do well to seek hard data on comparative costs of energy across the country and have them published.

[7] EXPERTS NEEDED. The Sanggunian may have realized that, on complicated subjects like the power industry, it needs experts to help the councilors understand the information fed to them by “resource persons” at its public hearing. Sanggunian members need to be informed on each issue, even if they vote most of the time according to the party’s wish or command.

Besides, ignorance, though blissful, is exposed when the councilors get crap from a resource person and don’t know it.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting