THE Energy Regulatory Commission (ERC) was prodded on Tuesday 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 that directly contribute to the rising power costs charged to consumers.
Senate Deputy Minority Leader Risa Hontiveros issued the statement after distribution utility giant Meralco confirmed that its power rate had gone up for the second consecutive month in October, warning it was “a move that may add P84 to the monthly power bill of a Filipino household consuming 200 kilowatt per Hour (kWh).”
“Now that electricity charges went up again, we hope the ERC will release soon its report for the reset of the WACC of transmission operator National Grid Corporation of the Philippines (NGCP), and end the WACC reset of distribution utilities like Meralco,” Hontiveros added, speaking mostly in Filipino.
Moreover, the senator noted: “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, 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).”
She 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,” the senator noted. That meant, she said, that “only 34 percent of NGCP’s collections and 52 percent of Meralco’s collections went to capital recovery, operation costs and maintenance.”
If WACC were brought down to a “reasonable rate of 8 percent, the big profits of NGCP and Meralco will be reduced, and the transmission and distribution charge imposed on consumers will also go down,” she explained.
While ERC officials recently assured senators that its reset process for the WACC rate for the NGCP is now complete, Hontiveros still hopes that the full reset report will be made public “sooner than later,” since the lowering of NGCP’s WACC “has been especially long overdue.”
She also wants an end to the “pass-on” charges to consumers among the NGCP expenses that have “nothing to do with its transmission operations,” Hontiveros added.
Likewise, Hontiveros asked ERC to prioritize the completion and release of the review and reset process for the WACC of Meralco and other distribution utilities, which the ERC also confirmed to be underway.
“For the sake of our consumers, ERC should not allow anything to slow down or halt the WACC reset process for Meralco and the distribution sector. We need the WACC reset for a fair transmission and distribution [playing field],” Hontiveros said.
“It’s time for ERC to get its act together, and use its regulatory powers to protect the interests of consumers who are dealing with high prices of basic goods and services. Ordinary Filipino households try to stretch meager incomes for rising costs of food, fare and schooling costs. Let’s prioritize the welfare of those who bear the burden of expensive electricity,” Hontiveros concluded.