Meralco refutes overcharging claims

MANILA, Philippines — The Manila Electric Co. (Meralco) has refuted allegations by a lawmaker that the company overcharged its customers starting in 2012, calling such claims baseless and unfounded, while also defending its ongoing power supply procurement from malicious accusations.

In a statement, Meralco first vice president and regulatory management head Jose Ronald Valles said the distribution utility’s rates undergo a review and confirmation process to ensure that these are fair and reasonable.

Valles said the company has no power to unilaterally set its own rates, noting that all rates reflected in the electricity bills of customers are approved by the regulator following a stringent and transparent process of public hearings.

“I would like to reiterate that as a highly regulated entity, Meralco strictly 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 Energy Regulatory Commission (ERC),” he said.

Santa Rosa City Rep. Dan Fernandez has claimed that since 2012, Meralco has overcharged its customers.

Meralco described as “unfortunate” the lawmaker’s focus on the company, noting that records would show that it is the only private distribution utility that has made a distribution refund in compliance with ERC directive.

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

On allegations that Meralco has an “extremely high weighted average cost of capital,” Meralco said the setting of the weighted average cost of capital (WACC) is a function of the regulator.

The company said its last approved WACC is the lowest allowed by the ERC under the performance-based regulation, whether for the National Grid Corp. of the Philippines or for a private distribution utility.

According to Meralco, the WACC was determined based on a set of rules that underwent public consultation and thorough review by the ERC.

This is an industry WACC that applies to all private distribution utilities in the same category and is not company-specific, Meralco noted.

It explained that it does not have a determined WACC since July 2015 because there has been no completed rate reset during that regulatory period up until now.

Meralco cited a recent study of the International Energy Consultants, which concluded that its rates are fair and reasonable since they reflect the true cost of electricity, as against other countries whose power costs are heavily subsidized by their governments.

Meanwhile, Fernandez has also urged the ERC to act on alleged irregular terms set by Meralco for its ongoing competitive selection process (CSP) for 1,800-megawatt baseload capacity.

The lawmaker, in a hearing last week, alleged that the terms of reference for the CSP favor certain power firms since the power plants that can join the auction are those that should be in commercial operation not earlier than January 2020, but no later than May 2025.

Six potential bidders have submitted their expression of interest for the upcoming CSP. These are GNPower Dinginin, First NatGas Power, SP New Energy, Mariveles Power Generation, Excellent Energy Resources and Masinloc Power Partners.

ERC Chairperson Monalisa Dimalanta said Meralco was told to make sure it is not unduly limiting the number of potential bidders in its CSP.

She said a letter was also sent to Meralco stating the ERC’s observations on the published bid invite.

“We already raised with Meralco our concerns on the limited number of potential participants that could participate (in the CSP),” Dimalanta said.

Meralco said that the company also secures an approval from the Department of Energy (DOE) of its power supply procurement plan and the terms of reference (TOR) before conducting the CSP to make sure that these are aligned with the requirements and standards set by the government.

“This is contrary to the baseless and malicious claims that Meralco’s TOR is tailor-fitted to favor select generation companies,” Valles said.

“Our past CSPs conducted are proof that no such tailor-fitting is happening, precisely because the TOR and other bidding documents are required to comply with existing policies of DOE and regulations of ERC, and the resulting Power Supply Agreement needs to be approved by regulator,” he said.

Meralco stated that its ongoing CSP is just a rebidding of a valid CSP held in 2020 given that the power supply agreements resulting from the original CSP were terminated by the two winning power suppliers due to lack of ERC approval for more than two years.

Meralco said the new CSP simply reiterated most of the provisions in the previous TOR approved by DOE.

It added that the terms strictly followed the previous guidance of DOE, particularly with respect to the requirement to limit the bidding to greenfield power plants to encourage new capacities, thereby ensuring security of supply and lowest cost to consumers.

Meralco said the six companies that have expressed interest to participate prove that there is competition and the company could get the least cost supply for its customers through the process.