Santa Rosa City lone district Rep. Dan Fernandez (Facebook)

For Santa Rosa City lone district Rep. Dan Fernandez, there are many reasons to turn down the franchise renewal application of power distribution giant Manila Electric Company (Meralco).

The outspoken solon enumerated these during a hearing of the House Committee on Legislative Franchises hearing Monday, May 13.

"We strongly oppose the early renewal of Meralco's legislative franchise,” said Fernandez, chairman of the House Committee on Public Order. Meralco's current franchise, as spelled out in Republic Act (RA) No.9209, won't expire until 2028.

Fernandez, a former movie star, accused company of "hid[ing] in the dark the abuses against consumer rights". He said "the bad outweighs the good" in the case of Meralco.

The legislator from Laguna claimed that the "biggest offense" committed by Meralco was when it overcharged its customers. But he said there are also other allegations that need to be examined before the House panel acts on the franchise renewal.

Fernandez said Meralco awarded power supply agreements (PSA) to so-called associated firms, or generating companies owned by Meralco’s mother company, the MVP group. He said this indicates "conflict of interest".

"Prior to entering into a mega liquefied natural gas (LNG) deal with generating companies owned by San Miguel Corp. and Aboitiz group, Meralco awarded PSAs to these companies, arousing suspicion that these PSA awardees were favored firms," he said.

He further claimed that Meralco’s service area has expanded outside the National Capital Region (NCR) sans the needed legislation by Congress

"The overall trend in power rates is upwards. Rate reductions are few and far between and rates are barely explained. Customers get refunds for overcharged fees through rebates in their power bills so Meralco gets to keep the cash," he noted.

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Turning more technical, Fernandez said power rates were driven up by Meralco's non-adjustment of weighted average cost of capital (WACC), which remains high at 14 percent. He says the rate setting per kilowatt hour (kwh) is heavily influenced by the WACC.

He said the WACC is used as basis for rate of return of investment instead of return of rate base (RORB), which would make power rates more reasonable.

"The list of assets in the regulatory asset base, which is the basis to evaluate the value of Meralco that is used to compute WACC, includes the Meralco museum, Meralco theater, its corporate wellness center and shooting range, which have nothing to do with its sole function of distributing electricity but affects rate setting," Fernandez said.

He said Meralco must first return to its customers the supposed excess charges it had collected through the years in a process that would be supervised by Congress and regulatory agencies.

Albay 2nd district Rep. Joey Salceda earlier filed House Bill (HB) No.9793, which sought an additional 25 years to Meralco’s existing franchise.