Meralco is about to implement the largest part of the
Supreme Court’s refund order issued back in 2002

By Emilio R. Gonzales III

n 15 November 2002, the Supreme Court ordered Meralco to refund its customers P0.167 per kilowatt-hour it had been collecting since 1994. The refund order stemmed from the Energy Regulatory Commission’s ruling that Meralco’s income taxes could not be included in the computation of Meralco’s operating expenses. A motion for reconsideration proved to be futile as the Supreme Court firmly decided in favor of Meralco’s refunding its overcharges to consumers.
Meralco divided the servicing of the refunds into four phases. The first phase covered residential and general service customers with consumption levels of not more than 100 kilowatt-hours (kWh) per month. Phases II and III cover residential and general service customers with consumption levels of 101 to 300 kWh and above 300 kWh per month, respectively. The fourth and final phase, the most cash intensive, is for commercial and industrial customers.
The cost to Meralco of the refund obligation is a staggering P30.1 billion owed to more than five million consumers. The refund for PhaseIV accounts for 62 percent of the total amount while Phases I, II, and III for the balance of 38 percent. On the other hand, customers belonging to Phases I and II of the refund constituted 82 percent of the total number to be refunded. Phase IV accounts for only two percent of the total number of refund customers.

The most cash intensive fourth and final phase of the Meralco refund is for commercial and industrial consumers

Almost two years since the refund was ordered by the Supreme Court, Meralco is now about to enter the last stretch of the refund. As of 30 June, Meralco had completed the refund forPhases I and II while refund for active clients on Phase III is ongoing. Meralco has processed refunds to 89 percent of the customers entitled to the refund and has paid 28 percent of the total amount of the refund. Phase III of the refund is currently on-going and is originally expected to be completed before the year ends despite Meralco’s cash flow problems arising from maturing loans.

Financial Woes
The Supreme Court’s refund decision impacted heavily on Meralco’s cashflow. What has so far been refunded already wiped out Meralco’s net income in the last nine years.
Based on its second quarter report, Meralco’s net income amounted to P1.071 billion for the first half of the year, while the last phase of the refund requires P2.569 billion. Even if Meralco finishes the year with double the net income twice as much as the net income it posted in the first half of the year, it will still be insufficient to cover the Phase IV refund. Given the financial predicament of Meralco, a lump sum payment scheme is an unrealistic option.

Alternative Scheme
Meralco’s proposed scheme for Phase IV is to divide the servicing of the refund into two groups. Phase IV-A will service refunds for small commercial or industrial consumers while Phase IV-B will service refunds for medium, large, and very large commercial or industrial consumers.

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