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VECO OWES CONSUMERS P2.2 BILLION AS OF APRIL 2014 Presented during a Public Hearing called by the Cebu City Council on May 28, 2014.

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Presentation on theme: "VECO OWES CONSUMERS P2.2 BILLION AS OF APRIL 2014 Presented during a Public Hearing called by the Cebu City Council on May 28, 2014."— Presentation transcript:

1 VECO OWES CONSUMERS P2.2 BILLION AS OF APRIL 2014 Presented during a Public Hearing called by the Cebu City Council on May 28, 2014

2 This all started here in 2010 Help in the empowerment of all electricity consumers in order to ensure the adequate supply of electricity at reasonable rates now and in the future. There is a law that created a regulatory agency but if only the power generators and distribution utilities (DU) like VECO attend the ERC hearings, then, as consumers we deserve to be taken for a ride and only in the back seat. Be involved! Learn what is happening to energy-related petitions filed with the ERC. Visit a web site at:

3 Why does VECO owe any amount to the consumers? In November 15, G.R. No , the Supreme Court ordered MERALCO for a refund of about P28 billion representing overcharges since The decision confirmed an ERB Order in 1998 that MERALCO overcharged its customers by including income taxes as part of the utility’s operating expenses

4 Why does VECO owe any amount to the consumers? The Supreme Court decision declared that: “Income Tax as Operating Expense Cannot be Allowed For Rate-Determination Purposes” The EPIRA of 2001 provided: Section 38. Creation of the Energy Regulatory Commission - There is hereby created an independent, quasi-judicial regulatory body to be named the Energy Regulatory Commission (ERC). For this purpose, the existing Energy Regulatory Board (ERB) created under Executive Order No. 172, as amended, is hereby abolished."

5 Why does VECO owe any amount to the consumers? In it’s 2003 Annual Report the ERC mentioned the MERALCO refund and the VECO cases as among those under “Resolution of Cases Involving Violation of ERC Rules and Regulations Subsequently on August 30, 2004, the ERC ordered VECO to stop the implementation of the Tax Recovery Adjustment Clause (TRAC)

6 Time line of events

7 TRAC applied by VECO

8 ERC’s inconsistency Resolution of Cases Involving Violation of ERC Rules and Regulations Four (4) cases on violations of ERC Rules and Regulations and other Related Laws were decided in Meralco on ERC Case No (ERB Case No ) and ERC Case No and Public Utility Division [PUD] – Olongapo on ERC Case Nos and In the meantime, eight orders were issued on alleged violations involving VECO, NPC, BELS, MECO and Meralco (2), PUD- Olongapo, and PAMES. Two (2) hearings were conducted on the same subject in Source: Annual Report of the ERC for 2003

9 What is the refund to consumers? Decisions on the related cases in the Supreme Court and ERC point to a fact established that the total TRAC collected by VECO from the consumers was P1,264,453,843. To claim otherwise would be inconsistent with the Supreme Court ruling that: “Income Tax as Operating Expense Cannot be Allowed For Rate-Determination Purposes”

10 It could reach P2B if interest is imputed at 8% p.a. Reckoned from the time (August 30, 2004) that the ERC ordered VECO to refund the illegal portion of the rates charged to the customers; the amount refunded by VECO over the six-year period shown above is not even able to pay for accrued interest on P1.23 billion. From September 2009 up to the present, if interest were to be imputed on the total outstanding refund, the entire liability could be very well over P2 billion.

11 How will this affect VECO’s sustainability in supplying power? At the moment, we have no idea what VECO’s total equity position is; but almost ten years ago, in December 2004 VECO reported that the total issued and outstanding shares amounted to P1.53 billion. Do we now have a situation where the power consumers have contributed more, if not, about half of the equity in the Distribution Utility?

12 Thank you!! For soft copies of this presentation and the accompanying notes, please send a request for the files to: Comments and reactions may be sent to: Vicente F. Gambito May 28, 2014 Cebu City Vicente F. Gambito


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