LAGUNA Rep. Dan Fernandez, the vice chairman of the House committee, has opposed Albay Rep. Joey Salceda’s bill filed last January seeking to award Meralco with an early extension of its 25-year congressional franchise set to expire in 2028.
Fernandez said questionable actions by Meralco have led to high power rates and abuses against consumers.
“Meralco says there’s light in life, but in reality Meralco hid in the dark the abuses against consumer rights,” Fernandez said last Monda during a hearing of the House committee on legislative franchise.
Fernandez said current power rates are high because while San Miguel’s SPPC power generating subsidiary terminated a PSA with Meralco, the distribution utility last January contracted 1,800 megawatts of supply with the same company at rates higher than the one that was terminated.
During the hearing, Meralco representatives said the acquisition of supply from the same company that terminated its previous PSA was allowed by law.
- According to Fernandez, the biggest offense committed by Meralco was to overcharge its customers but there were other allegations that needed to be examined before the House acts on the Meralco franchise, among them:
- Meralco awarded power supply agreements (PSA) to so-called associated firms, or generating companies owned by Meralco’s mother company, the MVP group, indicating conflict of interest;
- Before entering into a mega liquefied natural gas (LNG) deal with generating companies owned by San Miguel Corp. and Aboitiz group, Meralco awarded PSAs to these companies, arousing suspicion that these PSA awardees were favored firms;
- Meralco’s service area has expanded outside the National Capital Region (NCR) without legislation by Congress;
- The overall trend in power rates is upwards. Rate reductions are few and far between and rates are barely explained;
- Customers get refunds for overcharged fees through rebates in their power bills so Meralco gets to keep the cash
Fernandez also listed these key reasons to reject the renewal of Meralco’s franchise: - Rate setting per kilowatt hour (KwH) is heavily influenced by weighted average cost of capital (WACC) which remains high at 14 percent and has not been adjusted by Meralco. This drives rates up;
- WACC is used as basis for rate of return of investment instead of return of rate base (RORB) which would make power rates more reasonable;
- The list of assets in the regulatory asset base, which is the basis to evaluate the value of Meralco that is used to compute WACC, includes the Meralco museum, Meralco theater, its corporate wellness center and shooting range which have nothing to do with its sole function of distributing electricity but affects rate setting.
“For these reasons, we strongly oppose the early renewal of Meralco’s legislative franchise,” Fernandez said.
He said Meralco must first refund to its customers the excess charges it has collected through the years in a process that would be supervised by Congress and regulatory agencies.
Fernandez had accused Meralco of overcharging its customers by at least P200 billion since 2012 which Meralco has denied.
