(MANILA BULLETIN)

A Laguna congressman who is against the renewal of the Manila Electric Company’s (Meralco) franchise has once again lambasted the power distribution giant for its supposed failure to provide updates on its weighted average cost of capital (WACC).

Sta. Rosa City lone district Rep. Dan Fernandez, a vice chairman of the House Committee on Energy, says the technical-sounding WACC is a key factor in determining power rates.

Fernandez took Meralco to task during the House Committee on Legislative Franchises hearing on Tuesday, May 21 on the company's application for a new 25-year franchise.

Fernandez says that under the law that granted the existing Meralco franchise—Republic Act (RA) No.9209–the utility giant is required to submit a report on its WACC every four years.

He said the Meralco WACC had been stuck at 14.97 percent since 2010. The veteran solon said that this was "no longer accurate".

Fernandez said that to hit the WACC target of Meralco, power rates have to move upwards and stay high.

Consumers, he said, are burdened by power rates that are among the highest in the world Fernandez said Meralco’s WACC had been approved by the Energy Regulatory Commission (ERC).

He accused previous ERC officials of colluding with Meralco to keep the utility’s WACC at 14.97 percent. "Basically the problem we have seen is there’s a collusion between ERC and Meralco during the time of ERC chair Agnes Devanadera."

Fernandez said he found six cases that the ERC approved at that time which allowed Meralco to adjust its maximum average price. “This is where the wrong WACC of 14.97 percent is based,” he claimed.

He said the WACC should have been just 8.27 percent, so the rate of P1.35 being charged to consumers should be lower. “Basically it was legitimized by ERC at that time,” Fernandez further said.

The ranking solon said the ERC failed to fulfill its mandate to provide the least cost possible to consumers by allowing Meralco to adjust rates almost at will.

“The function of ERC is to regulate and this is being abused and not complied with...I think they have the moral obligation to compel Meralco, knowing that it’s much much lower than 14.97," he said.

Meralco Spokesperson Joe Zaldarriaga--in a statement sent to House reporters--said Fernandez's arguments "weren't legal" and stressed the need to address them "in the appropriate forum".

According to Zaldarriaga, it had been established in past House hearings that the WACC was an industry figure that applied to all private distribution utilities (DUs) in the same category. It is not company-specific WACC.

“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,” he said.

Meralco, he said, hasn't had a determined WACC since July 2015 because there has yet to be a completed regulatory rate reset.

As per RA No.9209, Meralco's current franchise will expire in 2028.