In a scathing privilege speech, Santa Rosa City lone district Rep. Dan Fernandez has accused power distribution giant Manila Electric Company (Meralco) of overcharging its 7.6 million customers for the past nine years. 

Fernandez claimed that Meralco has been carrying out "monopolistic" practices--something that had been enabled by its expansive, "mega-franchise". 

"It's high time we renew its franchise to pave the way for the split of the mega-franchise we granted Meralco,” Fernandez, chairman of the House Committee on Public Order and Safety, said in his speech. 

“If possible, we can split it into three franchises since Meralco actually operates in three sectors in Luzon— NCR (National Capital Region), South Luzon (Calabarzon) and North Luzon sector of Pampanga and Bulacan," he noted. 

The Laguna solon claimed that Meralco now controls at least 70 percent of Luzon’s electricity output--allowing it to manipulate the operations of power producers and sellers. 

"They control the whole of Metro Manila, NCR, they control the whole of Calabarzon, including my province, Laguna...They control Pampanga and Bulacan...They are so huge and enormous that they have subdivided the whole franchise. They have subdivided (it) into the central, southern, and northern sector," Fernandez explained. 

Since Meralco's franchise has grown so huge, the company can even "configurately" operate the Bohol franchise in the Visayas if it wanted to, he further claimed. 

With 60 percent of the country's gross domestic product (GDP) coming from NCR, Fernandez said Meralco can manipulate the Philippines' economic growth by having full control of electricity in Luzon. 

“They are monopolistic,” Fernandez said. He added that such actions constitute a national security issue. 

He also cited reports that Metro Pacific Investment Corp. (MPIC), Meralco’s mother company, had been attempting to acquire the natural gas power plant in Ilijan town, Batangas province. 

The $700-million plant has a 2,500-megawatt (MW) capacity and uses combined-cycle natural gas to operate. 

“If you combine the assets of Meralco and Ilijan Power Plant, they will be creating a vertical integration system wherein they will be controlling fuel supply, imported fuel facilities, power supply and distribution under one board of directors,” said Fernandez in a mix of Filipino and English. 

Ironically, it was Congress that granted Meralco its mega-franchise through Republic Act (RA) No.9513. 

But the actor-turned-congressman said Congress can still correct this since it has the power to "amend, revoke, suspend, and even subdivide their franchise". 

Excessive profits 

Fernandez said he called out the irregular manner by which Meralco computes its weighted average capital cost back in 2015, when the company was supposed to recompute. He claimed Meralco had fixed its weighted cost of capital at 14.97 percent, which the utility uses as basis to compute its profits. 

The Laguna solon said this defies Energy Regulatory Commission (ERC) rules requiring power distribution utilities to review and recompute their weighted average capital costs regularly. 

He said risk rates, interest net rates of banks, and regulatory asset base were elevated back in 2015 because of the Asian financial crisis. This crisis has long been over, yet Meralco continues to use the same weighted average capital cost to hide its excessive profits, Fernandez said. 

“We no longer have a financial crisis and all the interest rate, the country’s risk rate, their financial requirements, the indicators are saying that weighted average cost of capital is so low,” said Fernandez in Filipino. 

'Factual errors' 

On Wednesday, Nov. 8. Meralco Vice President and Head of Corporate Communications Joe Zaldarriaga cited what it called certain "factual errors" in Fernandez's statement. "We would like to clarify that Meralco does not control "70 percent of Luzon's electricity," said Zaldarriaga.  

He says that In the Meralco area, 90 percent p of industrial consumption and one third of commercial consumption is supplied not by the distribution utility but by competitive retailers, e.g., Aboitiz, First Gen, etc. 

He added that Meralco also does not serve "the whole of Calabarzon", contrary to the claim.  "There are many other electric cooperatives (ECs) and distribution utilities (DUs) in Calabarzon, including FLECO (in the province of Laguna), BATELEC I, BATELEC II (biggest EC in the country), Ibaan Electric, First Bay, Quezelco I, Quezelco III, and others in Batangas and Quezon," the Meralco official said. 

Meralco also does not "control Pampanga” but serves only a handful of barangays. Zaldarriaga said. The presence of other ECs and DUs in the province include Angeles Electric, PELCO I, PELCO II, PELCO III, San Fernando Light, among others. 

He further stated, “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.” 

"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. 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 P48 billion in 2023. Meralco has always capitalized on economies of scale to ensure that it can get the lowest generation cost from its power suppliers," concluded Zaldarriaga.