Metro Manila (CNN Philippines, November 22) — A former head of the Energy Regulatory Commission (ERC) on Wednesday said the Manila Electric Co. (Meralco) have hired consultants to determine the weighted average cost of capital (WACC), which affects power rates.
Agnes Devanadera, who led the ERC from 2017 to 2022, explained this was already the practice since she first took the post.
“I convened the commission and I said I am not sure whether we are doing the right thing if the entity to be examined will be required to pay and in fact procure the consultant,\” Devanadera said before the House Committee on Legislative Franchises.
\”Gobyerno ang regulator, gobyerno dapat ang mag-fund (The government is the regulator, the government must fund it), so there could be independence,” she also said,
Devanadera added that ERC then asked Congress for budget to pay for the consultant. It took time for the funds to be released, therefore delaying the process, she said.
She was asked to explain why the ERC during the fourth regulatory period failed to reset the Meralco’s WACC which has remained at 14.97% since 2015.
The ERC hires a third party consultant to review applications to reset the WACC.
“So anong klaseng resulta ang makukuha natin dyan?” House panel chairperson and Parañaque City 2nd district Representative Gus Tambunting asked.
[Translation: So what kind of result are we going to get from that?]
ACT Teachers Partylist Representative France Castro also questioned the practice.
“Nawindang ako doon sa sinabi na kailangan bayaran ng Meralco iyong consultant ng ERC,\” Castro said. \”So hindi niyo ba naisip na conflict of interest iyon? Bakit kayo nagpapabayad sa Meralco ng consultant para i-compute iyong WACC?”
[Translation: I was surprised that Meralco should be the one to pay for ERC’s consultant. Have you not realized that is a conflict of interest? Why did you allow Meralco to pay the consultant for computing the WACC?]
Santa Rosa City Representative Dan Fernandez, who pushed for the inquiry into Meralco’s franchise, said Devenadera’s explanation still does not justify delays in the resetting of the power distributor’s WACC.
He said Meralco’s WACC should only be at 9.62% as its distribution covers 70% of Luzon.
“Iyong sinasabi niyo na process na napakahaba, that is a lie,\” the lawmaker from Laguna said. \”Andito na ang mga dokumento dahil magko-compute na tayo. Ayaw ninyo kompyutin dahil pinangangalagaan niyo iyong 14.97% na WACC.”
[Translation: The very long process that you’ve been talking about, that is a lie. The documents are here and we can compute everything now. You don’t want to compute it because you don’t want to cut the 14.97% WACC.]
Fernandez earlier urged his colleagues to review and split Meralco’ s franchise as its “sheer bigness” has led to poor service and abuses.
In the Senate, Senator Risa Hontiveros previously asked the ERC to reset the WACC to help reduce the rising power costs.
Commenting on the overcharged issue, Meralco issued a statement on Thursday, saying that its rates “undergo a rigorous review and approval process before they are implemented to make sure these are fair and reasonable.”
All rates that are in the bill have prior lawful and regulatory approval as it cannot unilaterally set its own rates,” it said.The company added that the setting of the WACC depends on the energy regulator.
