Newly re-installed Energy Regulatory Commission (ERC) chair Monalisa Dimalanta said the final decision involving the 5th regulatory period (5RP) rate reset of Manila Electric Co. (Meralco) may have to be modified.
This after the regulatory body received various comments in a recent hearing on ERC’s budget for next year.
“With respect to Meralco’s 5th RP, it is correct that before I was suspended, there was already a decision for the 5th RP but I think also because it was discussed in the Senate, as correctly pointed out, the commission, I understand, has decided to revisit this matter and have made some modifications to the way forward,” Dimalanta said.
The changes will reflect “sentiments” shared during the Senate hearing last month, she added.
Earlier, Jose Ronald Valles, Meralco’s head of regulatory management, said customers could get as much as P16 billion in refund once ERC resolves the company’s 5RP rate reset, which covers the years 2022 to 2026.
Valles said once the 5RP is declared a lapsed period by the ERC, the regulatory body could confirm that Meralco’s rate for the period is P1.3522 per kilowatt hour (kWh) instead of P1.57 per kWh which Meralco applied for.
He said ERC will then direct Meralco to refund the average weighted actual tariff (AWAT) in excess of P1.3522 per kWh covering the entire 5RP.
A rate reset is conducted by the ERC to periodically review and adjust distribution rates charged by utilities like Meralco to ensure that rates reflect the actual costs of delivering electricity to factor in inflation, operational expenses and the weighted average cost of capital (WACC).
Due to Meralco’s sales mix, especially when residential customers consume more electricity than other customer classes, its AWAT exceeds the current final distribution rate of P1.3522 per kWh, Valles added.
“We estimate the amount of refund to be at least P16 billion for the four-year period of 5RP. Note that the current rate of Meralco is lower than the P1.3810 previously authorized by ERC. This rate was reduced by almost 3 centavos per kWh after a thorough review by ERC,” Valles recently said.
He said if ERC approves Meralco’s proposed P1.57 per kWh rate for 5RP during a reset proceeding, there would be no or very minimal AWAT refund.
Meralco’s next rate reset for the sixth regulatory period will be effective by July 2026.
Earlier, Senate committee on energy vice chairman Sherwin Gatchalian said if ERC would prompt a 5RP rate reset instead of considering it a lapsed period, there will be a higher refund to customers.
Gatchalian said he is confident that the WACC for Meralco would be much lower than the current 14.97 percent, if only the resetting process is completed.
“I think that the WACC for Meralco would go down if the review is completed, thus, it is for consumers’ interest that the ERC resumes its review of the rates for the 5th regulatory period. It shouldn’t be maintained at 14.97 percent because it’s the consumers who suffer from high distribution charges,” Gatchalian said.
