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Senator Sherwin Gatchalian is prodding the Energy Regulatory Commission (ERC) to expedite the reset of the power distribution rate for Manila Electric Co. (Meralco). 

Gatchalian's call followed remarks by former ERC Chairperson Agnes Devanadera at a hearing in the House of Representatives that Meralco had previously paid for expenses of ERC consultants who were tasked with determining the weighted average cost of capital (WACC) that has an impact on power rates. It has been discontinued. 

According to the senator, it was inappropriate for Meralco to foot the bill for the regulator’s consultants. 

“As we anticipate revised distribution rates that should be more favorable for our consumers, it is imperative that we not only hope but demand a refund if applicable,” said Gatchalian. 

The ERC, he said, should scrutinize the factors that go into computing Meralco’s WACC, which had been stuck at 14.97 percent since 2015. WACC is a key determinant in computing distribution rates. 

“The ERC should make sure that rates being passed on by distribution utilities are fair and correct for consumers,” said Gatchalian in Filipino. “Consumers should not be paying more than they should,” he added. 

According to ERC schedule, the final determination for the fifth regulatory period rate reset for distribution utilities, including Meralco, is in March 2024. Gatchalian noted that the original date set by the ERC to reset Meralco’s WACC had been delayed already by a year. 

Meralco had stated that charges reflected in consumer bills had been reviewed and approved by the ERC and that it adheres to ERC orders on cost adjustments arising from regular reviews. 

The House hearing was an offshoot a privilege speech by Santa Rosa lone district Rep. Dan Fernandez, which pointing to the unadjusted WACC as the key reason for consistently high power rates in country. 

Fernandez said the current WACC of Meralco was computed to allow the utility to cope with the Asian financial crisis in the past, but remained unchanged even after the crisis, allowing the utility to collect higher rates. 

In a statement, the power distribution giant denied having any power to unilaterally set its own rates. All rates reflected in the electricity bills of customers are approved by the regulator following a very stringent and transparent process of public hearings, Meralco said. 

“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 lawyer Jose Ronald Valles,Meralco First Vice President and Regulatory Management Head. 

As for Fernandez’s allegations that Meralco has an “extremely high WACC”, Meralco emphasized that the setting of the WACC was the function of the regulator. 

Meralco’s last approved WACC was the lowest given by the regulator under the Performance-Based Regulation (PBR), whether for National Grid Corporation of the Philippines (NGCP) or for a private distribution utility (DU). 

Moreover, Meralco claimed that it does not have a determined WACC since July 2015 because there was no completed rate reset during that regulatory period up until now. 

Meralco serves the entire National Capital Region (NCR) and nearby provinces.