A lawmaker yesterday asked the Manila Electric Company (Meralco) to refund some P200 billion in overcharges to its 7.7 million subscribers.
The overcharging, Laguna Rep. Dan Fernandez said, started in 2012.
The lawmaker made the statement as he reiterated his call for the subdivision of Meralco’s “super franchise” to make it more efficient to manage.
“Based on our computations, (Meralco) has overcharged its customers by some P160 billion starting 2012,” he said.
“Plus interests, this could add to P200 billion, due to overcharging and the extremely high weighted average cost of capital, which amounted to 14.97 percent, and remains unchanged up to now,” Fernandez said during the hearing of the House committee on legislative franchises on Wednesday.
During the same hearing, Meralco explained that the purchase of electricity goes through a “very strict” process.
“As to the purchase of distribution utilities such as Meralco from power generators, that is very strictly regulated,” Lawrence Fernandez, Meralco Vice President and head of utility economics, told lawmakers.
The company was confronted with allegations of conflict of interest by Caloocan Rep. Dean Asistio during the franchise committee hearing.
Meralco, whose franchise area covers the entire National Capital Region and nearby provinces, is widely known for its role as a power distributor.
Asistio, citing Meralco’s endeavors in power generation, asked during the hearing: “Isn’t there are conflict of interest here? It’s like Meralco is buying its own electricity supply.”
Meralco also reiterated that as a highly regulated entity, its rates undergo a rigorous review and approval process before these 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.
The regular reviews may result in adjustments like refunds directed by the ERC, to which Meralco complied in a timely manner.
Based on Fernandez’s computation, Meralco needs to refund all of its 7.7 million subscribers around P26,000 to P30,000 each for the overcharging.
According to him, Meralco was able to overcharge as it was allowed to become a “monopoly and monopsony.”
He said monopsony is defined as having one large corporation control the purchase of goods or services as the biggest buyer.
“Meralco is the one controlling the prices of electricity because it is the biggest seller and biggest buyer (of electricity in the country),” Fernandez said.
He also renewed calls for Congress to cancel Meralco’s franchise or divide it to ensure true competition in the power market, reduce power rates, and prompt good service.
“Meralco billing rates remain unchanged, and is still provisional since July 2011 to present,” Fernandez told the committee.
“The rate reset since 2011 is not yet completed, the error in calculation of rate for the third regulatory period from 2011 to 2015 is not yet fully corrected and this error was carried to 2016 up to the present.”
“The provisional rate of Meralco is higher by about 20 percent, thereby making up for an estimated over recovery or overcollection, or overcharging, or in other words, excessive collection,” he added.
