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Thursday, February 22, 2024

Group questions Meralco’s franchise

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Subscribers of Manila Electric Company (Meralco) are getting zero benefits from the utility’s franchise as the “economies of scale” that should cut costs are instead just bloating the company’s size and profits, a consumer advocate said.

“Usually in economies of scale, as we understand it, the larger you grow, the lower is your cost, so how come, the gargantuan franchise of Meralco has not been able to benefit us,” consumer advocate Romeo Junia–who had been involved as intervenor in cases filed at the Energy Regulatory Commission (ERC) related to power rates—said in a statement.

However, a Meralco representative said consumers have benefited from the company’s operations, especially as its overall power rates have shown to be competitive compared to many jurisdictions.

“The IEC or International Energy Consultants, an international organization in its study concluded that Meralco’s rates are fair and reasonable since it reflects the true cost as against other countries whose power costs are heavily subsidized by their governments,” Meralco vice president and head of communications Joe Zaldarriaga said.

Junia said the consistent increase in power rates being charged by Meralco to its customers was puzzling as these should be on a downward trend in inverse proportion to its customer base.

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Economies of scale normally lead to lower costs as the subscriber base grows, Junia said.

He said power rate hikes by Meralco defy sound business practices where the bigger the company grows, the lower its costs should be for consumers.

Junia also expressed support to a call made by Laguna Rep. Dan Fernandez for a review of Meralco’s mega franchise as it has now grown too big for efficient management by a single entity.

Junia said the review was very timely because Meralco appears to have abandoned its franchise duty to provide services at the least cost manner as the upward trend of power rates would show.

But for Zaldarriaga, Meralco rates are “fair,” which is the result of the company’s constant efforts to source the least cost available supply, through among others conduct of competitive selection process, despite challenging circumstances.

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