Senator Risa Hontiveros on Tuesday urged 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.
Hontiveros made this call after distribution utility giant Meralco increased its power rate for the second consecutive month in October, a move that may add PHP84 to the monthly power bill of a Filipino household consuming 200 kilowatts per hour (kWh).
She said the WACC for both transmission and distribution charges has directly contributed to rising power costs.
“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 Corp. of the Philippines (NGCP), at tapusin na ang WACC reset ng distribution utilities gaya ng Meralco (Now that the power rate has gone up anew, I hope ERC would release its final report on the reset of the WACC of the transmission operator of NGCP and complete the WACC reset of distribution utilities like Meralco),” she said.
“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,” compared to the WACC rates allowed in neighboring countries, such as Malaysia (7.5 percent), 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,” she said.
“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 (If the WACC would be reduced to a reasonable 8 percent, it would significantly reduce the profit of NGCP and Meralco and the transmission and distribution charges being charged to consumers).”
While ERC officials recently assured senators that its reset process for the WACC rate for the NGCP is now complete, Hontiveros said she hopes that the full reset report would be made public “sooner than later,” as the reduction of NGCP’s WACC “has been especially long overdue.”
“Thanks to the current flawed WACC rate, NGCP since 2015 has been raking in obscenely high profit margins while enjoying monopoly-like conditions and facing lower business risks than distribution utilities. This has to end,” she said.
She said the ERC should also 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. Kailangan natin ang WACC reset sa parehas na transmission at distribution (We need WACC reset both for transmission and distribution),” 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.” (PNA)
