The country’s largest and most profitable power distributor has energy sales at all-time highs and unprecedented double-digit growth in income.
Last week, a jubilant Meralco announced another banner year for the country’s largest and most profitable distribution utility: its net income surged to P45.8B in 2024, 21% higher than the P38B posted in 2023. Customer base breached the 8-million mark and energy sales increased 6% year-on-year, from 51B kwh to 54.1B kwh.
Energy sales were at all-time highs and the double-digit growth in income was unprecedented.
Meralco’s consolidated core net income (CCNI) in the same period increased 22%, from P37.1B in 2023 to P45.1B in 2024.
Meralco chairman and chief executive officer Manuel V. Pangilinan, said: “The year 2024 saw double-digit CCNI growth – with generation, RES and distribution as well as non-power subsidiaries contributing to the gratifying results. Total share of the unregulated business now accounts for 38% of CCNI.”
Distribution business contributed 62% of CCNI at P28-B, generation 24% at P10.9-B and Retail Electricity Supply (RES) and non-electricity business 14% at P6.1-B.
Beyond the strong financial performance, Pangilinan said, Meralco also secured approval of its franchise renewal and has already filed for its distribution rate reset.
Asked about the profit prospects next year, Pangilinan said the company would be able to gain profit guidance once ERC issues its decision on Meralco’s application of Annual Revenue Requirement (ARR) and Performance Incentive Scheme (PIS) for the 5th regulatory period.
Consumers push back
Meralco’s sterling performance drew strong pushback from consumers.
If we look at the numbers closely, we will wonder how a 6% increase in volume of sales can drive a 22% surge in income. On its face, it is disproportionate.
Lately, the so-called non-electricity business is getting some highlights. In this case it is 14% of CCNI and together with generation at 24%, they account for 38% of that income. If we consider this income stream in light of the provision in Meralcco’s franchise that its business is in the distribution of electricity, this part of the Meralco business will have no legal basis
It is telling that Pangilinan talks about renewal of the franchise that limits Meralco’s business to distribution in the same breath as generation, RES, and other non-electricity business. Is he not compromising the approval of the franchise renewal by setting out in stark terms Meralco’s violations of its franchise?
Until the language of the present and the proposed franchise is changed, Meralco’s business outside the distribution of electricity has no legal basis.
A major problem in the mixing of regulated and unregulated businesses spills into the rate setting. How will consumers know if the rates they are charged are not being used to underwrite the cost of unregulated businesses?
ERC clarification sought
Pete Ilagan, President of the National Association of Electricity Consumers for Reforms (NASECORE), has already written ERC chair and CEO Monalisa Dimalanta to clarify and make sure that rates are not used for the competitive or unregulated businesses of Meralco.
Pangilinan also mentioned the reset of the distribution charges and has pinned high hopes for hitting the P50-B target income for next year, once the new rate is approved under the 5th regulatory period.
Manny Pangilinan’s over confidence in the latest reset filing as path to higher revenues for Meralco is misplaced.
The reset is erc case no. 2025-035RC. The first hearing, jurisdictional, will be on March 3.
Pete Ilagan has already laid a logical, common-sense attack of this application for higher rate.
There are 2 applications that will start hearing, February 28, the AWAT True-Up under which Meralco has offered to refund P19-B if regulatory years 2024 and 2025 are considered lapsed and its calculation of the Actual Weighted Average Tariff (AWAT) True-Up vis-à-vis the final distribution rate of P1.35 pkwh is approved.
The other is the rate reset on March 3. The application here is to raise the rate from P1.35 pkwh to P1.68, pkwh more or less.
This represents a P0.33pkwh increase.
Pete Ilagan’s argument
Argument of Pete is simple and straightforward: If Meralco has offered a P19-B refund under the P1.35 pkwh rate, why will it need an increase of P0.33 pkwh under the rate reset?
Why should Meralco be given an increase to P1.68 when at P1.35 it is making a refund?
Other than that, former ERC Commissioner Alfredo Non has submitted calculations that the total refund of Meralco should be P180-B, not just P40-B as already implemented and refunded by Meralco. The balance to be refunded is P120-B.
The Supreme Court in Republic vs. Meralco, G.R. No. 141314 15 Nov 2002 said: “As correctly put by the ERB, operating expense should be a requisite of or necessary in the operation of the utility, recurring, and that it redounds to the service or benefit of the customers.” That is the criteria for making the cost recoverable or chargeable to consumers.
We can trace how the per kilowatt hour rate charged by Meralco in these numbers. In previous years until 2006, the DSM rate under return on rate base (RORB) was P0.7957 pkwh. The unbundling of rate in 2008 resulted in an increase to P0.9657 pkwh.
The start of performance based regulation in 2009 saw the rate jump to P1.2227 pkwh, which became P1.64 pkwh in 2014, then an interim average rate of P1.39 pkwh in 2015.
From 2022 until today, the price of electricity being charged by Meralco to its customers is P1.39 pkwh.
These rates are mirrored in the following list of annual net earnings of Meralco: 2007, P2.7-B; 2008, P3.1-B; 2009, P6.3-B; 2010, P10.1-B; 2015, P19-B and 2020, P21-B.
If ERC will do its job properly, the P1.68 pkwh applied for will not be granted. The rate could even go down to P1.05 pkwh, thus more refunds would be made.
The P50-B target net income for 2026 will just be MVP’s wish and dream.