Ex-ERC official calls for P150-B Meralco refund over rate miscalculations
MANILA, Philippines—A former commissioner of the Energy Regulatory Commission (ERC) claimed that the Manila Electric Company (Meralco) should refund its customers a total of P150 billion and reduce power rates based on a re-computation of its weighted average cost of capital (WACC).
Alfredo Non, who previously served as a commissioner for the ERC, stated that according to his calculations, customers of Meralco should receive the following refunds:
- P2,700 per month for those consuming 200 kwh monthly
- P9,500 per month for those consuming 300 kwh monthly
- P15,500 per month for those consuming 400 kwh monthly
- P51,000 per month for those consuming 1,000 kwh or more monthly
Non added that his computation, which has already been submitted to the ERC, also showed that adjustments in the monthly power rates should be implemented after the refund has been issued.
The proposed rate adjustments based on Non’s computation are as follows:
- Rate reduction of P22 per month for those consuming 200 kwh monthly
- Rate reduction of P79 per month for those consuming 300 kwh monthly
- Rate reduction of P129 per month for those consuming 400 kwh monthly
- Rate reduction of P428 per month for those consuming 1,000 kwh or more monthly
“That’s my initial computation, depending on how the appreciation of the ERC is,” said Non.
According to Non, the refund is warranted because Meralco has been billing P1.47 per kWh, despite the provisional authority rate being only P1.38 per kWh.
“Since 2012, there have been no complete rates,” the former ERC official explained.
“The rates should be reset every four years, so that means Meralco does not have a final rate,” he added.
Non stressed that Meralco’s rate is supposedly based on the temporary provisional rate of P1.38 per kWh, but this is not being adhered to.
“From 2012 until now, Meralco’s average billing rate to us is P1.47 per kwh. So, there is already an overbilling of P0.09 per kwh,” said Non.
Non also highlighted a mistake in the provisional rate, stating that it should actually be around P1.05 or P1.06 per kWh.
“There are two issues here,” Non said. “The wrong computation from 2012 to 2015 and the WACC,” he added.
“These are the two things that will change our rate: If the error is corrected and the decrease in interest rates,” he continued.
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 a lower profit to keep running.
In terms of its impact on consumers, a high WACC indicates that consumers may experience higher costs for the company’s products or services. On the other hand, a low WACC means consumers may benefit from more stable or lower prices for the company’s products or services.
He said he began conducting his own calculations after his retirement in 2018.
“After I did the calculations, I submitted it to the ERC, but of course, it’s now up to them already,” said Non.
WACC ‘too high’
In a privilege speech during the House plenary last month, Santa Rosa City Rep. Dan Fernandez accused Meralco of having a WACC that is too high, which is being passed on to its customers.
“They have not computed their weighted average cost of capital… never, since 2015 up to this year. They have not computed their weighted cost of capital which was set at 14.97 percent. That is the percentage of their profit they base from since 2010,” Fernandez said in Filipino.
Amid the series of accusations of overcharging thrown at Meralco, Senator Sherwin Gatchalian had urged the ERC to expedite the reset of the power distribution rate for the power distributor.
According to the ERC’s latest timeframe, the finalization of the fifth regulatory period’s rate reset for distribution utilities (DUs), Meralco included, is set for March 2024.
However, Gatchalian said the original date set by ERC to complete the review for Meralco has already been delayed by more than a year.
Meralco issues clarifications
Previously, Meralco affirmed that all charges reflected on monthly electricity bills were legal and had been approved by the regulatory body ERC. Meralco said it has been complying with all directives for cost modifications resulting from the ERC’s routine evaluations of their rates.
In a statement on Nov. 26, Meralco First Vice President Jose Ronald Valles — who’s in charge of the power distributor’s regulatory management — denied accusations of overcharging its customers, explaining that the company “has no power to unilaterally set its rates.”
“I would like to reiterate that as a highly regulated entity, Meralco strictly adheres to the rules governing its operations and franchise, and the rates we implement always have prior approval from the regulator. A testament to the strict review, these rates are still subject to periodic confirmation process by the ERC,” said Valles.
“The proper venue for discussing the refund claims is the ERC, which has the rate-setting power, and the regulator has already decided on a refund totaling P48 billion, which Meralco implemented in a timely manner.”
Meralco also issued clarifications regarding allegations of market power abuse. It pointed out “factual errors” in Fernandez’s privileged speech.
“Records 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,” said Meralco spokesperson Joe Zaladarriaga.
“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.