Press Release - After latest power rate hike, Hontiveros demands "long-promised" ERC reduction on the WACC for transmission, distribution charges

Senator Risa Hontiveros on Tuesday pressed the Energy Regulatory Commission (ERC) to complete and release the results of its "long promised" reset of the Weighted Average Cost of Capital (WACC) for both transmission and distribution charges, which have directly contributed to rising power costs.

Hontiveros made the statement after distribution utility giant Meralco announced that its power rate had gone up for the second consecutive month in October - a move that may add P84 to the monthly power bill of a Filipino household consuming 200 kilowatt per Hour (kWh).

"Ngayong tumaas na naman ang singil sa kuryente, sana ay ilabas na ng ERC ang pinal na report para sa reset ng WACC ng transmission operator na National Grid Corporation of the Philippines (NGCP), at tapusin na ang WACC reset ng distribution utilities gaya ng Meralco. In this economic crisis, fixing the WACC rates will go a long way in lowering the transmission and distribution costs being passed on to consumers every month," Hontiveros said.

The senator, who has been calling for a review of WACC rates since 2019, explained that the WACC is one of the "building blocks" for computing power costs under the government's rate-setting methodology called the "Performance-Based Regulation (PBR)". Hontiveros noted that the WACC rates set for NGCP (15.04 percent) and distributors like Meralco (14.97 percent) are "shockingly excessive," when compared to WACC rates allowed in neighboring countries like Malaysia (7.5) Thailand (7.2 percent) and Indonesia (2.3 percent).

"In the 3rd Regulatory Period in 2015, the 15.04 percent WACC for NGCP allowed it to obtain a 66 percent profit, while the 14.97 percent WACC for Meralco allowed it to obtain a 48 percent profit. That meant only 34 percent of NGCP's collections and 52 percent of Meralco's collections went to capital recovery, operation costs and maintenance. Kung ibaba natin sa risonableng 8 percent ang WACC, bababa ang malaking tubo ng NGCP at Meralco, at bababa din ang transmission at distribution charge na pinapataw sa consumers," she pointed out.

While officials from the ERC recently assured senators that its reset process for the WACC rate for the NGCP is now