Senator Risa Hontiveros on Tuesday urged the Energy Regulatory Commission (ERC) to promptly finalize and make public the outcomes of its long-awaited reassessment of the Weighted Average Cost of Capital (WACC) for both transmission and distribution fees. These charges have played a direct role in the escalating power expenses.

Hontiveros issued this statement following the announcement by the distribution utility giant Meralco that its electricity rates had increased for the second consecutive month in October. This adjustment could potentially result in an additional cost of P84 per month for Filipino households consuming 200 kilowatt-hours (kWh) of electricity.

“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 Corporation of the Philippines (NGCP), at tapusin na ang WACC reset ng distribution utilities gaya ng Meralco. 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 said.

The senator, 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)”. Hontiveros noted that the WACC rates set for NGCP (15.04 percent) and distributors like Meralco (14.97 percent) are “shockingly excessive,” when compared to WACC rates allowed in neighboring countries like Malaysia (7.5) 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. 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,” she pointed out.

While officials from the ERC recently assured senators that its reset process for the WACC rate for the NGCP is now complete, Hontiveros said that she hopes that the full reset report will be made public “sooner than later,” since the lowering 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. Dapat matuldukan na rin ang pagsama sa “pass-on” charges sa consumer ng mga gastos ng NGCP na walang kinalaman sa transmission operations nito,” Hontiveros added.

Likewise, Hontiveros said that the ERC should 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,” 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. Kakarampot ang kita ng ordinaryong pamilyang Pilipino na pinagkakasya sa iba’t-ibang bayarin para sa pagkain, baon sa eskwela, pamasahe at iba pa. Unahin naman natin ang kapakanan ng publiko na nahihirapan na sa mahal na singil ng kuryente,” Hontiveros concluded.

Photo: Risa Hontiveros FB