Surigao del Sur rep suggests abolishing ERC due to Meralco WACC issue

Surigao del Sur Rep. Johnny Pimentel (FILE PHOTO)

MANILA, Philippines — Surigao del Sur 2nd District Rep. Johnny Pimentel raised on Wednesday the possibility of abolishing the Energy Regulatory Commission (ERC) for failing to recompute the weighted average cost of capital (WACC) of the Manila Electric Company (Meralco) for 13 years.

Pimentel made the suggestion at the hearing of the House Committee on Legislative Franchises on the WACC issues that Santa Rosa City Rep. Dan Fernandez raised in a privilege speech last Nov. 7.

The WACC determines the return a company should be getting to ensure the viability of its investments. A higher WACC means the company needs to make a bigger profit to ensure its operations. A lower WACC indicates that it need not make too high a profit to sustain its investments.

Fernandez said Meralco’s current WACC of 14.97 percent was no longer accurate. He said it should be cut down to just 9.23 percent — which would eventually lower the electric bills of consumers.

Factors preventing a reset process

At Wednesday’s hearing, ERC Commissioner Floresinda Digal enumerated factors that prevented the commission from doing a reset process (RP) on the WACC.

Among the factors she cited were a lack of quorum due to commissioners being suspended from service, a need to resolve the petitions of complainants, budgetary constraints, and issues with consultants tapped to do the reset process.

“In 2016, we already had a resolution. But that one was not published because there was a pending rule-making petition by the MSK — the Matuwid na Singil sa Kuryente Coalition. We resolved that issue first before we proceeded with the other procedure for the reset,” Digal explained.

“We struggled with having no quorum at some point — 2017 to 2018.  Then [in] 2019 and 2020, we encountered budgetary constraints. Yes, we were being supported by both the Senate and the House of Representatives when it comes to the budget for the consultants. However, those are in the form of congressional insertions which we did not get, which were not released to us. So we failed to acquire the consultants to conduct the reset,” she added.

In connivance with Meralco?

But Pimentel was not satisfied with Digal’s statements, asking if ERC was working in favor of Meralco.

“Maybe during the next hearing, if you cannot answer my questions, I think, Mr. Chair, we should do something to abolish the ERC… It’s useless. has done nothing,” Pimentel said, speaking partly in Filipino.

“I do not understand. I cannot comprehend as a lay person, as an ordinary citizen, why it took you 13 years when there was already an analysis for 2016 to 2019. Don’t tell me that four years passed and you still haven’t put it out?” he said.

“Assuming that it is true that you had impediments, issues, but would this take 13 years?  Don’t tell me year in, year out you had several issues. Just to release this WACC? Unless, of course, that you are in connivance with Meralco so that a new WACC would not be released.”

Fernandez also mentioned the possible connivance between ERC and Meralco in his Nov. 7 privilege speech. He said that the ERC seemed to have deliberately refused to release an updated WACC.

A day after Fernandez’s speech, Meralco spokesperson Joe Zaldarriaga denied any wrongdoing on the part of Meralco. He insisted that the power distributor had been giving service beyond the expectations of its customers.

“Our rates and service are monitored strictly by the regulator and records show that we have always outperformed and have more than complied with the level of service expected from us.,” Zaldarriaga said.

“As far as our rates are concerned records will also show that at current levels Meralco’s charges are lower than many jurisdictions in the country which is the reason why some areas are clamoring for Meralco’s level of service.”