House energy panel vice chair lists grounds to reject Meralco franchise renewal

REP. Dan Fernandez has listed what he said were grounds to reject the renewal of Meralco’s franchise, including the utility’s failure to provide updates on its weighted average cost of capital (WACC), a key factor that determines power rates.

Fernandez, House energy committee vice chair, said under the law that granted the Meralco franchise—RA 9209–the utility giant is required to submit every four years a report on its WACC. The Meralco WACC has remained at 14.97 percent since 2010.

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

He said Meralco’s 14.97 percent WACC set in 2010 was no longer accurate.

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

“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, adding 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,” Fernandez said.

He said the WACC should have been just 8.27 percent so a rate of P1.35 being charged to consumers should be lower.

He 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. Why?” he lamented. “ERC must protect consumers. Meralco must provide electricity at the very least cost. But it’s not being done.”

He decried the ERC failure to exercise its moral obligation to require Meralco to adjust its WACC.

“I think they have the moral obligation to compel Meralco, knowing that it’s much, much lower than 14.97,” he said.

For these reasons, he said instead of renewing the Meralco franchise, it should be split into three “to allow real competition.”