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Tuesday, March 5, 2024

Meralco should refund customers P150b, lower rates — ex-ERC exec

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A former commissioner of the Energy Regulatory Commission (ERC) said on Tuesday that Manila Electric Company (Meralco) should refund its customers a total of P150 billion and lower power rates after regulators re-compute the utility’s weighted average cost of capital (WACC).

Meanwhile, Meralco strongly denied allegations that it has been overcharging its customers starting 2012, adding that all rates had been approved by the ERC and it adheres to orders from the commission to adjust costs.

Alfredo Non, erstwhile ERC commissioner, said his computation showed that Meralco customers were entitled to the refunds amounting to P2,700 a month for those consuming 200 kwh monthly, P9,500 per month for those consuming 300 kwh monthly, P15,500 per month for those consuming 400 kwh monthly, and P51,000 per month for those consuming 1,000 kwh or more monthly.

“So P150 billion should be returned to us. I have already submitted my proposed computation to ERC,” Non said.

He said his computation also included new rates that Meralco should charge its customers after the refund is completed.

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“Now after the refund is paid, the monthly bill will change,” he add d.

Non batted for the implementation of the adjustments, specifically rate reductions of P22 per month for those consuming 200 kwh monthly, P79 per month for those consuming 300 kwh monthly, P129 per month for those consuming 400 kwh monthly, and P428 per month for those consuming 1,000 kwh or more monthly

“That’s my initial computation, depending on how the appreciation of the ERC is,” Non said.

The refund, according to him, is due because Meralco charges P1.47 per kwh although the provisional authority rate was only P1.38/kwh.

“Since 2012, there have been no complete rates.,” said Non. “The rates should be reset every four years, so that means Meralco do es not have a final rate,” he said.

Non also said the basis of Meralco for its rate was the provisional P1.38 per kwh which is“only temporary but is not being followed.

“From 2012 until now, Meralco’s average billing rate to us is P1.47 er kwh. So, there is already an overbilling of P0.09 per kwh,” Non pointed out .

Non also cited an error in the provisional rate which he said should only be P1.05 or P1.06/kwh.

“There are two issues here,” Non said.“The wrong computation from 12 to 2015 and the WACC,” he said.

“These are the two things that will change our rate: If the error is correc ted and the decrease in interest rates,” said Non.

WACC is considered one of the“building blocks” for computing power osts under the government’s rate-setting methodology called the Performance-Base Regulation (PBR).

Laguna Rep. Dan Fernandez said earlier the unadjusted WACC was the key reason for consistently high power rates.

He noted that the current WACC of Meralco was computed to allow the utility to cope with the Asian financial crisis then but this remained unchanged even after the crisis, allowing the utility to collect higher rates.

Non said the numbers he listed were his own calculations as submitted to the ERC.

“I started doing my own calculations after my retirement in 2018. Aft er I did the calculations, I submitted it to the ERC, but of course it’s now up to them already,” he said.

Sen. Sherwin Gatchalian had urged ERC to expedite the reset of the WACC, saying the commission should examine components in determining it in Meralco’ case, which is 14.97 percent since 2015.

“ERC should make sure that charges passed on to consumers by distribu tion utilities are fair and correct,” Gatchalian said.

“Consumers should not pay more than what is proper,” he stressed. According to the ERC timeframe, the results of the WACC review and reset for distribution utilities, Meralco should be finalized by March 2024.

But Gatchalian said the original date set by ERC to complete the review for Meralco has already been delayed by more than a year.

Meralco first vice president and regulatory management head Jose Ronald Valles said the company’s rates undergo a review and confirmation process to ensure that they are fair and reasonable, just like other distributors.

Meralco maintained that it has no power to unilaterally set its own rates. All rates reflected in the electricity bills of customers were approved by the regulator following a very stringent and transparent process of public hearings.

“I would like to reiterate that as a highly regulated entity, Meralco stric tly adheres to the rules governing its operations and franchise and the rates we implement always have prior approval from the regulator. A testament to the strict review, these rates are still subject to periodic confirmation process by the ERC,” Valles said

“The proper venue for discussing the refund claims is the ERC, which has th rate-setting power and the regulator has already decided on a refund totalling P48 billion, which Meralco implemented in a timely manner,” he said.

Meralco said it is unfortunate that the lawmaker is focusing on Meralco when records will show that Meralco is, in fact, the only private distribution utility (DU) that has made a distribution refund in compliance with ERC directive.

The company also said that that the setting of the weighted average cost of capital (WACC) is a function of the regulator.

It said Meralco’s last approved WACC is the lowest WACC given by the regula tor under the Performance-Based Regulation (PBR).

The WACC was determined based on a set of rules that underwent public consultation and thorough review by ERC, the company said.

“This WACC is an industry WACC that applies to all private DUs in the same category and is not company specific. In addition, Meralco does not have a determined WACC since July 2015 because there was no completed rate reset during that regulatory period up until now,” Meralco said.

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