The Manila Electric Co. (Meralco) has strongly refuted claims made by Santa Rosa City Rep. Danilo Fernandez that it has been overcharging its customers since 2012. Meralco First Vice President and Regulatory Management Head, Jose Ronald Valles, emphasized that the company’s rates undergo a thorough review and confirmation process to ensure fairness and reasonableness.
“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. These rates are subject to periodic confirmation by the Energy Regulatory Commission (ERC),” Valles stated.
Addressing Fernandez’s allegations regarding Meralco’s “extremely high weighted average cost of capital (WACC),” the power company clarified that the setting of the WACC is determined by the regulator. Meralco highlighted that its last approved WACC is the lowest given by the regulator under the Performance-Based Regulation.
“The WACC was determined based on a set of rules that underwent public consultation and thorough review by the ERC. Moreover, the figure given is an industry WACC that applies to all private Distribution Utilities (DUs) in the same category and is not company-specific,” Meralco clarified.
Meralco further 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.
The company also emphasized its commitment to sourcing the least costly available supply through a transparent and competitive selection process (CSP). Before conducting the CSP, Meralco secures the approval of the Department of Energy (DoE) for its Power Supply Procurement Plan and the Terms of Reference (TOR) of its proposed CSP to ensure alignment with government requirements and standards.
“Contrary to baseless and malicious claims, Meralco’s TOR is not tailor-fitted to favor select generation companies. Our past CSPs are evidence that no such tailor-fitting occurs since the TOR and other bidding documents must comply with existing policies of the DoE and regulations of the ERC. The resulting Power Supply Agreement also requires approval from the regulator,” Valles clarified.
Meralco highlighted that its ongoing CSP is a rebidding of a valid CSP held in 2020. The company explained that the Power Supply Agreements resulting from the original CSP were terminated by the two winning Power Suppliers due to a lack of ERC approval for more than two years.
“The new CSP simply reiterates most of the provisions in the previous TOR that has been approved by the DoE. Its terms strictly follow the previous guidance of the 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 the lowest cost to consumers,” Meralco added.
Recently, six companies have expressed interest in participating in the CSP, which Meralco sees as evidence of competition and the potential to obtain the least costly supply for its customers through the process.
“The CSP is a highly transparent process, and any resulting Power Supply Agreements from this bidding will still be subject to review and approval by the ERC,” Valles concluded.
It is essential to note that Meralco’s commitment to adhering to regulations and ensuring fair rates, along with its transparent power supply procurement process, helps provide clarity and reassurance to its customers.
Source: The Manila Times
