SUBSCRIBERS of Manila Electric Company (Meralco) are getting zero benefits from the utility’s mega-franchise as the “economies of scale” that should reduce costs for electricity subscribers is instead just bloating the utility’s size and profits.
“Usually, in economies of scale, as we understand it, the larger you grow, the lower is your cost, so how come the gargantuan franchise of Meralco has not been able to benefit us,” said staunch consumer advocate Romeo “Butch” Junia, who had been involved as intervenor in cases filed at the Energy Regulatory Commission (ERC) related to power rates.
Junia said the consistent increase in power rates being charged by Meralco to its customers was puzzling as these should be on a downward trend in inverse proportion to its customer base. “Instead of inverse proportion where the bigger the size, the lower the cost, it became the opposite where an increase in rates followed an increase in business,” said Junia, who has been engaged as an intervenor in cases filed at the ERC by various groups like Nasecore, Freedom from Debt Coalition and others.
He said power rate hikes by Meralco defy sound business practices where the bigger the company grows, the lower its costs should be for consumers. In Meralco’s case, the utility has now cornered electricity supply in the National Capital Region which should have been followed by a downward trend in prices.
“The reference rate for comparison should be the RORB (return on rate base) of P0.79 per KWH to the rate today of P1.35 per KWH, which peaked at P1.64 per KWH under PBR (performance base rating),” said Junia.
“The Meralco franchise is obviously at an uneconomic scale, measured by its cost of service as reflected in the rates, and must therefore be cut down to economic size,” Junia stressed.
RROB was previously implemented in 2006 to 2007 while PBR was first used in 2008.
“Meralco’s net earnings rose from P2.7 billion under RORB to current level of PHP20+B. If that is the measure of economies of scale, Meralco is fantastic,” Junia lamented.
Junia also expressed support to a call made by Laguna Rep. Dan Fernandez (lone district, Santa Rosa) for a review of Meralco’s mega franchise as it has now grown too big for efficient management by a single entity.
Junia said the review was very timely because Meralco appears to have abandoned its franchise duty to provide services at the least cost manner as the upward trend of power rates would show.
