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Gatchalian: Resetting power distribution rate could lead to higher amount of refund for Meralco consumers

Senator Win Gatchalian said a resetting by the Energy Regulatory Commission (ERC) of the power distribution rate for key distribution utilities (DU), such as the Manila Electric Co. (Meralco), could lead to a higher refund for consumers.

The vice-chair of the Senate Committee on Energy made the statement following an estimate made by Meralco that completion by the ERC of its 5th regulatory reset covering the period of 2022-2026 could result in a refund of P16 billion to consumers. The refund represents the actual weighted average price and the maximum average price, or the highest allowable costs that can be charged to 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. Inaasahang mas malaki pa kaysa sa P16 bilyon na sinasabi ng Meralco,” said Gatchalian. 

Gatchalian pointed out that Meralco’s weighted average cost of capital (WACC), which is an input in setting distribution rates, has remained unchanged since 2015. The current WACC for Meralco stands at 14.97%. 

The ERC has supposedly ruled that Meralco’s fifth regulatory period (5RP) covering 2022 to 2026 is already considered lapsed. During a lapsed period, consumers pay charges that are no longer reflective of the current cost of the service while awaiting the approval of a new rate. Gatchalian has earlier flagged the ERC’s decision to forego a review of Meralco’s distribution rate for the 5RP, saying such a move may be detrimental to consumers. 

The senator said he is confident that the WACC for Meralco would be much lower than the current 14.97% if only 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 added that the ERC should address consistent delays in conducting regulatory reviews covering industry players in the energy sector.

Photo by Mark Cayabyab/OS WIN GATCHALIAN