Republic of the Philippines f ENERGY REGULATORY COMMISSION i San Miguel Avenue, Pasig City t ENGR. LEO DY doing business Under the name and style “AQUAFARM 2”, Complainant, -versus- ERC CASE NO. 2008-0073 CC AGUSAN DEL NORTE ELECTRIC COOPERATIVE, INC. (ANECO), Respondent. x “x DECISION Before this Commission for resolution is the verified complaint filed by AQUAFARM 2 on June 10, 2008 against Agusan Del Norte Electric Cooperative, Inc. {ANECO) for the following: alleged installation of defective or flawed meter, incorrect recalibration of the installed electronic meter no. 95311; and, lack of legal bases for the distribution and metering charges, and the use of multiplier of 40, resulting in an over- billing of PhP285,398.70. FACTS OF THE CASE AQUAFARM 2 is @ registered customer of ANECO. AQUAFARM 2 through its owner, Engineer Leo Dy, alleged that on November 16, 2007, the electro-mechanical meter (Meter No, 90928) installed at its premises under Account No. 0190-1212 was replaced by ANECO with a fully electronic General Electric KV2C meter with Serial Number 35564454 (Meter No. 95311). The replacement of the meter was allegedly without notice and consent from AQUAFARM 2,, 4 oERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 2 of 14 For its part, ANECO alleged that, on November 2007 AQUAFARM 2 applied for reconnection, after a voluntary disconnection. It found defects on the electro- mechanical meter and the current transformers necessitating the said replacement. AQUAFARM 2, at that time, took the findings of ANECO in good faith. It further disclosed that the two Nikon brand current transformers installed were supplied by the Dy Teban Hardware, which is also owned by Engineer Leo Dy. ‘On January 30, 2008, ANECO entered into an agreement with Cepalco Energy Services & Trading Corporation (CESTCO) for the supply of the necessary electrical materials for the rehabilitation of the metering installations of its big electricity consumers. It sent letters to its big consumers, all dated February 13, 2008, including Engr. Leo Dy's other business establishments, informing them of its efficiency program for its valued industrial and commercial consumers. The program includes replacement of electro-mechanical meters with new fully electronic meters, new current transformers, and meter base/box at a total cost of PhP50,000.00 per establishment to be shouldered by ANECO’s consumers. On March 19, 2008, AQUAFARM 2 wrote ANECO complaining about the additional financial burden considering that it owns six (6) other establishments. In response, ANECO, in its letter dated April 7, 2008, explained the benefits of the program and stressed that it intends to merely recover the costs thereof. On May 7, 2008, AQUAFARM 2 wrote ANECO questioning the correctness and validity of the April 2008 bill of AQUAFARM 2 in the amount of PhP285,398.70 because of the drastic increase compared to the previous months’ consumption. AQUAFARM 2 further alleged that, it had doubts on the calibration accuracy of the installed meter and if the same bears the required ERC seal. Thus, AQUAFARM 2 remitted only theERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 3 of 14 amount of PhP150,000.00 to ANECO and the remaining amount of PhP135,398.70 was deposited in a bank held in trust for ANECO. Subsequently, AQUAFARM 2 filed a formal letter-complaint dated May 20, 2008 with the Consumer Welfare Desk (CWD) of ANECO regarding the replacement of its meter without notice and without its consent, and other meter-related issues such as the ensuing cost of PhP50,000.00, the charge in the amount of PhP416.40 in his billing statement, 12% VAT and the multiplier of 40 used by ANECO. In its letter dated May 22, 2008, ANECO clarified that the replacement cost issue has become moot and academic because its Board of Directors decided to provide the metering set to its Industrial Consumers free of charge under Board Resolution No. 049. Be that as it may, AQUAFARM 2 filed this verified complaint with respect to its other issues. This case was set for hearing on August 29, 2008. ANECO was enjoined not to disconnect the AQUAFARM 2's electric service. Both parties were directed to submit their respective pre-trial briefs. During the initial hearing, only the AQUAFARM 2's counsel appeared. The counsel for ANECO submitted a formal request for postponement due to a previous engagement. AQUAFARM 2 requested for the conduct of an ocular inspection and ‘meter test, which the Commission granted. On September 10 ~ 12, 2008 the technical inspection was conducted by a team of engineers from the Commission. Results of the inspection and testing were relayed to the parties during the post-inspection conference on September 11, 2008. » ohERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 4 of 14 Thereafter, hearings were held on October 13, 2008 and March 4, 2009. ‘On July 19, 2010, the Commission directed both parties to submit AQUAFARM 2's billing history from September 2008 to present. In compliance with the sald Order, ANECO submitted on July 30, 2010 AQUAFARM 2's billing history from September 2008 to present. Complainant, on the other hand, submitted its compliance on August 4, 2010. DISCUSSION The Inspection and General Reports submitted by the Commission's Technical Inspection Team disclosed that there were no connection defects in the installation of the subject meter and the two current transformers, contrary to AQUAFARM 2's allegation that the installation of Meter No. 95311 was defective or flawed. However, the Technical inspection Team noted that Meter No. 95311 had no ERC seal, but it had ANECO's lead seal 7. Further, the test results of the subject meter showed that its accuracy was within the allowable limit set by the Commission. The said meter was thereafter re-installed after sealing with ERC Seal No. 0880615550 and ERC sticker No. 071157929. Based on the foregoing inspection resuits, it appears that ANECO violated the pertinent provisions of Article 2.11.3 of the Distribution Services and Open Access Rules (DSOAR). The aforementioned provision expressly states that: “No meter shall be placed in service unless it has been tested, certified and sealed by the ERC. The seal attached to the meter by the ERC is a warranty (1) that the meter is an acceptable or accepted type, and (2) that it operates within the allowable limits of tolerance.” ‘ y)ERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 5 of 14 Since the subject meter was found to be accurate and without signs of tampering or any defect, the same is presumed to be accurate, following the principle of Presumption of regularity. However, the Technical Inspection Team noted that the result of the Manual Reading of the Voltage and Current and other Parameters under Diagnostic 1, showed that there were 28 occurrences of cross phase recorded which indicate previous alteration in the connections of the meter. As to AQUAFARM 2's current transformers (CTs), the test results showed that both CTs were found to be beyond the allowable limit of plus or minus 3% prescribed under Section 8.4.2 of the Philippine Distribution Code (PDC) and Section 9.3.2 of the Philippine Grid Code (PGC). The Technical Inspection Team's reports also revealed that ANECO's Seal No. 013467 was attached to the terminal cover of the subject meter; ANECO Seal Nos. 013413 & 013421 were attached on the meter enclosures; ANECO Seal Nos. 004167 & 013402 were attached to the enclosure of CT#9203817 and ANECO Seal Nos. 013493 & 013462 were attached to the enclosure of CT#9203817. These conditions show that the entire metering facilities were tightly secured by ANECO and there was no sign of tampering found on the said facilities. AQUAFARM 2's metering facility is composed of several devices, the meter and the two (2) CTs. Aside from the discovery that both CTs have an error beyond the allowable limit of +/- 0.3% prescribed under Section 8.4.2 of the PDC and Section 9.3.2 of the PGC, the Commission further noted that these types of CTs are applicable for indoor use only and not suitable for outdoor purposes. Thus, the Commission's Technical Inspection Team recommended that AQUAFARM 2's CTs be replaced with 4ERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 6 of 14 Rew ones that conform to the PGDC requirements. Considering that these are dedicated transformers, AQUAFARM 2 must shoulder the costs thereof. Although it was noted that the CTs were supplied by AQUAFARM 2, ANECO should not have allowed their installation. Instead, ANECO should have installed the type of CTs appropriate for the intended usage, as prescribed in the PGDC. In view of the foregoing defects found in the AQUAFARM 2's CTs, the billings rendered by ANECO corresponding to AQUAFARM 2's energy consumption are all deemed inaccurate. Thus, we find the provisions of Article 3.5.7 of the DSOAR to be applicable in this case, to wit: “3.8.7 ADJUSTMENT FOR BILLING Billing errors resulting from a defective/stop meter without any evidence of tampering shall be governed by the provisions of these guidelines and the Magna Carta of Residential Electricity Consumers. < Kes In cases of other billing errors, the following principles shall apply: (a) Refunds for overpayment shall be computed back to but not beyond the date on which the error or omission commenced and be immediately effected and ERC confirmation be secured immediately. (b) Payments for undercharge shall be computed back to the date on which the error commenced, however, in no case where the error or omission is due to the fault of the DU, shall a bill for undercharge be computed for a period exceeding three (3) months, ek In the first place, ANECO should not have installed AQUAFARM 2's CTs. From the time of their installation, AQUAFARM 2's correct monthly bills can not be ascertained at this point in time. ¢ WeERC CASE NO. 2008-073 DECISION/September 27, 2010, Page 7 of 14 In their General Report, the Technical Inspection Team recommended that AQUAFARM 2's CTs be changed and replaced by new ones. To date, however, AQUAFARM 2's new CTs have not been installed at its premises in view of AQUAFARM 2's denial of access to its metering facilities to ANECO, This is in violation of Article Il, Section 2.10.12 of the DSOAR on respondent's access rights. AQUAFARM 2's counsel manifested during the conference held after the inspection on September 11, 2008, that they will not grant access to ANECO until the resolution of the instant complaint, Considering the foregoing, AQUAFARM 2's bill shall be computed applying the provisions of Article 3.5.7 of the DSOAR and Article 33 of the Magna Carta for Residential Electricity Consumers (Magna Carta) as the CTs which form an integral part of the metering facilities of AQUAFARM 2, were found to be defective. Article 33 of the Magna Carta expressly provides that: ™* x x Article 33. Obligation to Pay Billing Adjustments. ~ A consumer may be compelled to pay a billing adjustment in case there is a stoppage or failure by the customer's meter to register the full amount of energy ‘consumed without any fault on the part of the customer. x x x In cases where there is actual stoppage or any conspicuous defect of the said meter, the distribution utility may only be allowed to recover the unregistered consumption for a maximum period of three (3) months prior to such discovery of the stoppage. x x x The refund or billing adjustment should be based on the rate prevailing during the period sought to be recovered, and the estimated consumption shall be based upon the result of the ERC test on the affected meter during the time of discovery, or his average use of energy for the immediately preceding six-month period of like use, or the lowest monthly consumption within three (3) months after the time of discovery.” The defects on the AQUAFARM 2's CTs can be considered as conspicuous for having been installed by ANECO who is expected and presumed to know that the CTs are not properly suited for the said customer, Respondent ANECO is, therefore, found 4 FWERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 8 of 14 to be negligent in this respect in the discharge of its duty as a public utility. As such, the maximum recovery period should only be limited to three (3) months prior to the date of discovery. ‘Assuming arguendo that the issue is not one of a defective meter, the matter could still be considered as “other billing errors" as contemplated in Article 3.5.7 of the DSOAR. Nonetheless, if AQUAFARM 2 is eventually found to have been undercharged, the maximum recovery period of three (3) months would still be applicable. At this point, it is well to emphasize the ruling made by the Supreme Court in the case of Ridjo Tape and Chemical Corporation vs. Court of Appeals, et al. G.R. No. 126074, February 24, 1998, where the Court established the doctrine that the public utility has the imperative duty to make a reasonable and proper inspection of its apparatus and equipment to ensure that they do not maffunction. Its failure to discover the dofects, if any, considering the length of time, amounts to inexcusable negligence. It further elucidated that a more plausible interpretation is to apply the rule on negligence whether the defect is inherent, intentional or unintentional, which therefore covers tampering, mechanical defects and mistakes in the computation of the consumer's billings. The ruling in the Ridjo Tape case was reiterated in the case of MERALCO vs, Wilcon Builders Supply Co., Inc., GR No. 126074, June 30, 2008, where the ‘Supreme Court added that: “Public utilities should be put on notice, as a deterrent, that if they completely disregard their duty of keeping their electric meters in serviceable condition, they run the risk of forfeiting, by reason of negligence, amounts originally due from their customers. The court cannot sanction a situation wherein the defects in the electric meter are allowed to continue indefinitely until suddenly the public. utilities concerned demand payment for the unrecorded electricity utilized, 4 4ERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 9 of 14 When jin the first place, they should have remedied the situation immediately. x x x.” Having established the maximum allowable period for the recovery of unbilled consumption prior to discovery, the correct electric consumption of the customer may be estimated using the methodologies provided for by the DSOAR. ‘Among the methodologies to be used in arriving at the estimated consumption, the only recourse is to determine the complainant's lowest monthly consumption within the period of three (3) months after the time of discovery. Since the correct metering facility has not been installed due to AQUAFARM 2's refusal of access to ANECO, the estimated consumption of the latter cannot yet be determined. From the records of this case, the metering facilities of AQUAFARM 2 need to be relocated for failing to meet the standards set in Article 2.11.1 of the DSOAR, as amended, which states that: “2.41.1 METER INSTALLATIONS Billing meters shall be provided for each User at each Connection Point or at the primary side of a dedicated transformer and shall be accessible for inspection and reading. x x x x x x A customer shall bear the cost of relocation of his electric watthour meter under the following circumstances: 1. The customer requests for the relocation of his electric watthour meter, or 2. The meter installation fails to meet the conditions under the first paragraph resulting from improvements done on the customer's premises, or when the meter installation and other facilities have been found/proven to be tampered, thereby necessitating such relocation. In the event that the Customer fails to take any or all of such measures within thirty (30) days after receipt of notice of non-compliance, the DU shalll have the right itself to take (or cause to be taken) such measures without further notice. The customer shall be responsible for any and all costs and expenses incurred as a result of its non- compliance. Failure to pay the cost shall be considered 4 £ yeERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 10 of 14 grounds for disconnection after a thirty (30) day due notice.” The metering facilities are located inside the premises of AQUAFARM 2, thus, ANECO does not have free access to inspect or read the meter. At this point, AQUAFARM 2 should be strongly warned that it must allow ANECO access to its premises to remove and install the correct metering facilities in the right location. Continuous refusal of AQUAFARM 2 to allow access to ANECO may be a ground for disconnection of electric service in accordance with the DSOAR, as amended. Considering that complainant AQUAFARM 2 refused to allow respondent ANECO to install the correct metering facilities after complaining on the alleged erroneous billing for the month of April 2008, AQUAFARM 2 remains liable to pay its monthly bills after April 2008. Each monthly bill shall be based on the lowest recorded monthly consumption within three (3) months from installation of the new metering facilities. On the distribution charges and metering charges as shown in the billing statement of AQUAFARM 2, these were found to be in accordance with the approved rates for Industrial Customers of respondent ANECO under ERC Case No. 2001-98, its Unbundled Rates Decision dated January 26, 2004, as modified in subsequent Orders of the Commission dated August 30, 2005 for the Prompt Payment Discount (PPD) and September 4, 2006. Thus, based on the aforementioned Orders, the following are the approved distribution and metering charges of ANECO for its Industrial Customers:ERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 11 of 14 ‘Approved | Revised Unbundled | Charges Rates (Order (Decision | dated dated Jan. | Aug. 30, 2005) ERC Case No. 2001-918 Distribution Charges: Demand Charge(Php/kW) 21.78 Distribution System Charge(Php/kWh) 0.4949 ‘Supply Charges: Retail Customer Charge(Php/kWh) 43.06 Metering Charges: Retail Customer Charge(PhP/Meter/Mo.) 416.40 The above rates in the Commission's August 30, 2005 Order were the same rates shown in the Schedule of Unbundled Power Rates for January 2006 Billing Cycle of ANECO as mentioned by AQUAFARM 2 in its Position Paper. Respondent ANECO implemented the modified charges in the September 4, 2006 Order from November 2006 to October 2007 considering that the implementation thereof is only for a period of ‘one year and reverted back to the previous charges in the August 30, 2005 Order starting November 2007. This explains the issue contained in AQUAFARM 2's “Complaint Three on the Position Paper’ regarding the changes in the Metering Charges of ANECO during those periods from PhP414.34 to 416.40 to 418.46 and reverted back to 416.40. Thus, the rates charged by ANECO to AQUAFARM 2 were in accordance with the aforementioned Commission's Decision and Orders. These charges, however, of respondent ANECO shall be subjected to the Commission's verification and confirmation for any under/over recoveries. With respect to the multiplier of 40, considering that the AQUAFARM 2's CTs should not have been installed in the first place, this issue becomes moot and academic, On issue of damages, both parties cannot claim damages and attomey's fees as the Commission has no jurisdiction to award the same. aERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 12 of 14 It appears from the foregoing that respondent ANECO have violated the pertinent Provisions of the DSOAR, from installing inappropriate metering facilities to installing meters and current transformers without ERC seal. Thus, it should not escape liability for violating such provisions. Hence, a Show Cause Order should be issued against respondent ANECO requiring it to explain why it should not be held liable for fines and Penalties under Article 46 of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act (EPIRA). WHEREFORE, the foregoing premises considered, the Commission hereby finds ANECO to have violated the pertinent provisions of the DSOAR and the PGDCs for being remiss on its obligations to provide complainant AQUAFARM 2 with metering equipment within the standards set by the Commission resulting to inaccurate billings. Accordingly, respondent ANECO is hereby directed to immediately replace and relocate the metering facilities of herein complainant AQUAFARM 2. Further, let a Show Cause Order be issued to respondent ANECO directing it to explain why it should not be held liable for fines and penalties under Article 46 of Republic Act No, 9136 (EPIRA) for the installation of a meter and two (2) CTs without the appropriate ERC seal. Complainant AQUAFARM 2, on the other hand, is directed to allow respondent ANECO access to its premises in order to relocate and install the correct metering facilities. Failure of AQUAFARM 2 to allow respondent ANECO access to its metering facilities to relocate the same shall be a ground for disconnection of its. electric service. Complainant AQUAFARM 2 is further directed to pay respondent ANECO the following: (1) Billing adjustment for three (3) months prior to the filing of the complaint on May 20, 2008 based on the lowest recorded monthly consumption under 4 £4ERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 13 of 14 normal operating conditions within three (3) months from installation of the new metering facilities; and (2) Monthly bills from May 2008 up to the time of installation of the new metering facilities based on the lowest recorded monthly consumption under normal operating conditions within three (3) months from installation of the new metering facilities. AQUAFARM 2's monthly bills shall be computed on the bases of the recorded energy consumed and as reflected in its new metering facilities installed by respondent ANECO starting from the installation of the new metering facilities. SO ORDERED. Pasig City, September 27, 2010. ZENAIOA di, be DUCUT Chairperson pyne— Aeorg 7 RAUF A. van ‘Commissioner (On Official Travel) MARIA TERESA R. CASTANEDA CommissionerERC CASE NO. 2008-073 DECISION/September 27, 2010 Page 14 of 14 Copy furnished: 1. AGUSAN DEL NORTE ELECTRIC COOP., INC. (ANECO) Km. 2 Jose C. Aquino Avenue Butuan City, Philippines 2. ENGR. LEO C. DY Butuan Solid Ice Plant Km. 3 Baan Highway, Butuan City 3. ATTY. WILFRED D. ASIS Counsel for the Complainant 2" Floor, Gloria Bldg. Rosales St., Butuan City avetaPvid6ci20080736¢ AQUAFARNL200YDectin oe