Meralco denies being monopolistic, keeping capital cost high | Inquirer News

Meralco denies being monopolistic, keeping capital cost high

Spokesperson Joe Zaldarriaga points out ‘factual errors’ in Rep. Dan Fernandez’s privilege speech
/ 07:34 PM November 08, 2023

meralco gears up for barangayu elections

MANILA, Philippines — The Manila Electric Co. (Meralco) pointed out on Wednesday some “factual errors” in the privilege speech delivered a day before by Santa Rosa Rep. Dan Fernandez during the House plenary.

In that speech, Fernandez accused Meralco of doing the following things, among others:

  • refusing to recompute its weighted average cost of capital that was too high and that it passed on to its customers
  • maintaining a monopolistic franchise that controls 70 percent of the electricity of Luzon
  • exercising anti-competitive behavior

Meralco, through spokesperson Joe Zaladarriaga, denied the accusations.


No power over WACC

“We have no power to determine the weighted average cost of capital (WACC) as this is a regulatory function,” Zaldarriaga said, referring to the function of the Energy Regulatory Commission (ERC).

The WACC is a percentage that determines how much return a company should be getting to ensure the viability of its investments. A higher WACC means a company needs to make more profit to ensure operations, while a lower WACC indicates that it needs only a lower profit to keep running.

According to Fernandez, Meralco had maintained a WACC of 4.97 percent WACC since 2010, which was no longer accurate, as it should have been lowered by now to 9.23 percent.

“They have not computed their weighted average cost of capital… never, since 2015 up to this year,” Fernandez said.

“Since 2015 up to now, the ERC has not been recomputed, and that was in accordance with the Asian Crisis in 2010. But we did not have any financial crisis in 2014 and 2015, and the risk rate of the country, their financial requirements, indicators, are telling [us] that the weighted average cost of capital is so low,” he added in Filipino.

Not a monopoly

“We would like to clarify that Meralco does not control ’70 percent of Luzon’s electricity’,” Zaldarriaga said.


“In the Meralco area, 90% of industrial consumption and 1/3 of commercial consumption is supplied not by the distribution utility but by competitive retailers, e.g., Aboitiz, First Gen, etc.,” he added.

In his speech, Fernandez said: “They control the whole of Metro Manila, NCR [National Capital Region]. They control the whole of Calabarzon including my province Laguna. They control Pampanga at Bulacan. They are so huge and enormous that they have subdivided the whole franchise,” Fernandez said.

“They subdivided it into the central, southern, and northern sectors because Meralco’s franchise is so big already. They cannot even operate and configuratively operate the Bohol franchise,” he added.

In response, Zaldarriaga named other electric cooperatives and distribution utilities supplying power to Calabrzon:

  • First Laguna Electric Cooperative Inc. (Fleco), with its main office in Lumban, Laguna
  • Batangas I Electric Cooperative Inc. (Batelec I), with its main office in Calaca, Batangas
  • Batangas II Electric Cooperative Inc. (Batelec II), with its main office in Lipa City, Batangas
  • Ibaan Electric Corp., with its main office in Ibaan, Batangas
  • First Bay Power Corp., with its main office in Bauan, Batangas
  • Quezon I Electric Cooperative Inc. (Quezeleco I), with its main office in Pitogo, Quezon
  • Quezelco II Electric Cooperative Inc. (Quezelco II), with its main office in Infanta, Quezon

In Pampanga, Meralco has no control over the whole power supply of the province — only some barangays, Zaldarriaga said.

No abuse of market power

“Records likewise show that Meralco is fully compliant with all government regulations and even outperformed the level of service required by the regulator. This is precisely the reason why some local government units are clamoring for Meralco to take over their service,” Zaldarriaga said.

“Further, while Meralco is the largest utility in the country, it has never committed and has no record of any anti-competitive behavior or abuse of market power,” he went on.

“On the contrary, we have always managed to supply electricity to our customers in the most transparent and least cost manner, and is the only distribution utility that has complied with an ERC directive to refund distribution charges by refunding more than 48 billion pesos in 2023,” he added.

Fernandez to respond asked Fernandez for his comment on Zaldarriaga’s statement. He said he would respond.

Fernandez is not the only lawmaker who has asked Meralco to address the issues he raised in his speech.

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Last July, Sen. Risa Hontiveros said that policy reforms, particularly through recomputing Meralco’s WACC, would be needed to lower power costs.

Hontiveros said that Meralco had already benefitted from a high WACC, which if corrected, would result in a decrease in distribution and transmission charges.

TAGS: Dan Fernandez, Joe Zaldarriaga, Manila Electric Co., Meralco coverage, Meralco WACC, weighted average cost of capital

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