The House of Representatives did not do its job. If it did, we would have known why we, Meralco’s captive customers, were charged P2.348 B for advertising in the 2nd and 3rd Regulatory Periods while Mactan Electric Co. (MECO) charged its customers zero, nada, not one red cent.
The next biggest advertising spender after Meralco was Cagayan Electric Power and Light Co. (CEPALCO) whose customers were charged P217 Million, emphasis on the ‘M’. Visayan Electric Co. (VECO) charged P22.2 M and it is the next biggest distribution utility, after Meralco.
Under its 25-year franchise last renewed in June 2003, Meralco has the responsibility to supply our electricity in the least cost manner. Language is clear and unambiguous; intent is plain and straightforward. For the 25-year life of Meralco’s franchise our electricity supply from Meralco should be at least cost.
Wouldn’t that be the first focus of the House Committee on Legislative Franchises when looking into the necessity of renewing the franchise, especially one that still had a 3-year life to its expiry? The Committee is chaired by Paranaque Representative Gustavo Tambunting.
Least cost, apparently, was last of the Committee’s concerns. While there is no clear definition yet of ‘least cost’, lining up comparable costs like advertising would have been instructive to the Committee. Just sitting Meralco down before the Committee and going thru its costs, line-by-line, would have guided the Committee to a fair decision. There are at least 16 other comparative cost categories the Committee could have gone into, if it were to be serious in looking into Meralco’s compliance with its least cost obligation.
For instance, under Regulatory Liaison and Compliance, a nebulous expense or cost category that could cover paper clips and top peso law firms, Meralco charged P2.2 B versus the next highest, VECO, at P113 M, again emphasis on the ‘M’. Ibaan Electric charged only P117,000.00.
Tragically for Meralco’s captive customers, the Committee was looking hard another way.
Quoted in the Business Mirror on August 13, 2024, Rep. Tambunting said: “xxx we have held meetings to discuss the franchise application of Meralco. Since then, we have received various letters of support’ xxx referencing nearly two dozen business groups, including industry federations and the Japanese and British Chambers of Commerce.”
Long before August and as early as May last year, I submitted to the Committee an updated version of the 2015 Freedom from Debt Coalition (FDC) Position Paper for the Revocation of the Meralco Franchise. The call for revocation was anchored on Meralco’s business ventures beyond the distribution of electricity, which is its mandate under Sec. 1 of the franchise. Meralco is now heavily invested in generation, despite the clear limits of its franchise. One investment is offshore in Jurong Island, Singapore, blatantly violating the territorial bounds set in Sec. 1.
Also submitted to the Committee was my Position Paper on Performance Based Regulation (PBR), the enabling tool for Meralco’s rates not being least cost. While Meralco routinely raises in defense of its high rates the Energy Regulatory Commission’s (ERC) egregious failure to properly and timely implement the PBR, the Committee and the House should have looked independently at Meralco’s franchise obligation to supply electricity at least cost. In other words, ERC’s shameful failure to do its job should not absolve Meralco of its franchise obligation, nor should it diminish our expectation that Congress will do its job as sole grantor of the franchise.
Unfortunately for us, the House Committee only had ears for the federations and the business community.
I am not surprised by the all-out support of business for Meralco. In the translation of the Distribution, Supply and Metering charges of Meralco into rates for various customer classes, the residential customers bear the most of the burden – the highest pkwh rate. Large industrial customers pay a fraction of what residential customers pay, especially those consuming 400 or more kwh per month. Commercial and industrial customers consume roughly 2/3 of electricity sold but contribute 1/3 of the DSM revenue. Residential customers, on the other hand, consume 1/3 of the electricity sold but contribute 2/3 of Meralco’s DSM revenue. This translation is supposed to be based on the cost of service per customer class, but we have not really gone into any significant review of this translation process for us to say with confidence that the cost allocation is fair.
For instance, in the 3rd Regulatory Period, the last and only completed rate reset since 2011, the cost of RLC was increased from P2.02 B as applied to P2.2 B as approved but the increase was shifted from Regulated Distribution Services and Distribution Connection Services to Regulated Retail Services, which is predominantly borne by residential customers. That kind of cost shaving needs revisiting. But it has remained vague and opaque.
The House missed much in this renewal. The consumers even more.
Next Week: More on business support for Meralco.
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