Meralco reiterates that, as a highly regulated entity, all components of its rates and charges are approved by the ERC before they are collected from consumers. Meralco has no power to unilaterally set rates, and only the ERC has the authority to determine what rates Meralco can charge after public hearings and rigorous scrutiny to ensure that these rates are fair, reasonable, and least expensive.
In addition, power rates undergo a periodic confirmation process, which may result in adjustments such as refunds or additional collection depending on the regulator’s assessment results.
Meralco disputes recent allegations of overcharging as completely baseless and a clear distortion of truth. On Meralco’s weighted average cost of capital (WACC), the distribution utility wishes to clarify that this is set by the regulator and that the last ERC-approved WACC of Meralco was determined in 2011 to apply to a period from July 1, 2011, to June 30, 2015.
The WACC given to Meralco was the lowest compared to other Distribution Utilities and transmission companies. Since Meralco is not allowed to recover corporate income tax, the effective WACC, net of tax, was only about 10.5%, which is way below the 12% return approved by the Philippine Supreme Court in many jurisprudence.
After June 30, 2015, the ERC did not do a rate reset or determine a new WACC for Meralco and other DUs. Meralco applied to ERC for an interim rate of 1.39/kWh, much lower than its previous rate of 1.60/kWh. However, after hearings, ERC allowed Meralco a rate of only 1.3810/kWh. As ERC has not issued any rule to govern the rate-setting of all DUs after June 30, 2016, in 2022, it resolved to finalize the distribution rate of Meralco by reducing it further to 1.3522/kWh to apply from July 1, 2015, to June 30, 2022 (lapsed period). This current rate of Meralco is now final and executory.
The Decision of ERC to lower Meralco’s rate to 1.3522/kWh resulted in Meralco being directed to refund a total of P48 Billion, which Meralco implemented in a timely manner from 2021 to 2023.
The ERC Decision that resolved Meralco’s final rate during the lapsed period also categorically stated that the valuation of its Assets starting in 2011 did not consider inflation, contrary to the malicious allegation made during the recent Senate hearing on Meralco’s franchise. Hence, the accusation of overstatement of assets and double charging is a lie. Meralco notes that all the false and misleading allegations against it were based on the dissenting opinions in the ERC Decision that finally resolved Meralco’s rates during the lapsed period and from the distorted and malicious accusations of retired ERC official Mr. Alfredo Non.
Since ERC is a collegial body, Meralco will follow only the majority Decision, which is consistent with the Rule of Law and democratic principle that the rule of majority governs.
Meralco assures its stakeholders that the distribution utility strictly adheres to the rules and regulations governing its operations and franchise. As an active government partner in nation-building, Meralco remains committed to fulfilling its mandate of delivering stable, reliable, and safe electricity service to its customers at the least cost possible.