Senator Sherwin Gatchalian said over the weekend that the Energy Regulatory Commission’s (ERC) decision to reset the power distribution rate for key distribution utilities (DUs) like Manila Electric Co. (Meralco) could lead to a higher refund for consumers.
“I believe that the refund from Meralco would be significantly higher once the ERC completes resetting the distribution rate under the 5th regulatory period. It is expected to be bigger than the P16 billion that Meralco is saying,” Gatchalian said in a statement.
Meralco expects a P16-billion refund once the ERC issues a decision on its 5th regulatory reset, covering the period of 2022-2026. The refund represents the difference between the actual weighted average price and the maximum average price, or the highest allowable costs that can be charged to consumers.
Gatchalian said Meralco’s weighted average cost of capital (WACC), a factor in setting distribution rates, has remained unchanged since 2015. The current WACC for Meralco stands at 14.97%.
The ERC has reportedly ruled that Meralco’s 5th regulatory period (5RP), covering 2022 to 2026, is already lapsed. During a lapsed period, consumers pay charges that are no longer reflective of the current cost of service while awaiting the approval of a new rate.
Gatchalian previously criticized the ERC’s decision to forego a review of Meralco’s distribution rate for the 5RP, saying it could harm consumers.
The senator expressed confidence that Meralco’s WACC could be lower than the current 14.97% if the resetting process is completed.
“I think that the WACC for Meralco would go down if the review is completed, thus, it is for consumers’ interest that the ERC resumes its review of the rates for the 5th regulatory period. It shouldn’t be maintained at 14.97% because it’s the consumers who suffer from high distribution charges,” he said.
The lawmaker also called on the ERC to address consistent delays in conducting regulatory reviews for industry players in the energy sector.
Meralco senior vice president and head of regulatory management Jose Ronald Valles said the ERC reported that a decision has already been made on Meralco’s 5RP application, ruling that the entire 5RP is considered lapsed and Meralco will retain the P1.3522 rate.
“We anticipate that once ERC has released the decision on our 5RP treating it as lapsed period and confirming that our rate for 5RP is pegged at P1.3522, instead of P1.57 per kilowatt-hour that Meralco has applied for, the ERC will direct Meralco to refund the average weighted actual tariff [AWAT] in excess of P1.3522 per kWh covering the entire 5RP,” Valles said.
