Meralco president Jesus Francisco said they would abide with the decision of the high tribunal and now start studying ways to implement the ruling.
According to initial estimates, Meralco would need to refund some P800 million for the three months that it collected the increase.
The high tribunal, however, suggested to Meralco that instead of actual refunds, the amount due to the customers could be credited to future billings.
The increase was approved by the Energy Regulatory Commission (ERC) on June 2, 2004, which effectively hiked the generation charge from P3.1886 to P3.3213 per kilowatt-hour,
In a 21-page en banc decision penned by Associate Justice Romeo Callejo Sr., the SC denied with finality the motions for reconsideration filed by Meralco and the ERC.
The SC said that the June 2, 2004 order of the ERC was void because Meralco did not comply with the requirement to publish its amended application for increase and did not allow its customers and the local government units concerned to submit their comments.
This violated Rule 3, Section 4(e) of the implementing rules and regulations (IRR) of the Electric Power Industry Reform Act (EPIRA), it explained.
"Publication of the application for rate adjustments in a newspaper of general circulation in the locality where the applicant operates and the need for the ERC to consider the comments of the consumers and the local government units concerned are mandatory," the SC said.
In its motions for reconsideration, the ERC and Meralco said that Meralco’s amended application for an increase in its generation charge is not covered by Rule 3, Section 4 (e) of the IRR of the EPIRA.
ERC and Meralco claimed that the provision is applicable only to the general rate application and not to applications for cost recovery pursuant to escalator clauses or purchased power of fuel adjustment clauses.
The latter requires a summary proceeding to allow a distribution utility to update certain costs such as fuel and/or generation costs, Meralco argued.
Francisco explained further that as a distribution utility, Meralco "is not supposed to absorb the cost but it should be passed on to its customers.
"It all goes back to the issue of under recovery. We will ask the ERC for authority to recover this cost in another way, although we are not yet sure how," he explained.
The SC, however, said that this contention cannot be sustained as rules and guidelines created by the ERC, such as a generation rate adjustment mechanism for the recovery of the distribution utilities’ fuel and purchase power costs like the Generation Rate Adjustment Mechanism (GRAM), should conform to the provisions of the EPIRA.
Peter Ilagan, president of the National Electric Consumers for Reform (Nasecore), welcomed the development, saying that the SC’s ruling underscored the need to conduct public hearings for power rate adjustments.
Francisco himself disclosed that all its future petitions before the ERC will undergo public notices.
"Since the petition came up, we have been very careful in the publication of petitions," he said. — With Donnabelle Gatdula