Meralco rate hike set for next billing cycle

By Sheldeen Joy Talavera, Reporter

CUSTOMERS of Manila Electric Co. (Meralco) are expected to face higher distribution charges in the next billing cycle after the Energy Regulatory Commission (ERC) approved the utility’s first rate reset in 15 years.

“The new rate will take effect in Meralco’s next billing cycle upon receipt of the ERC’s decision. The draft decision and final determination are undergoing final proofreading,” ERC Chairperson and Chief Executive Officer Francis Saturnino C. Juan told BusinessWorld on Sunday.

The ERC approved an average distribution rate of P1.48 per kilowatt-hour (kWh) for the regulatory year ending June 30, 2027, up from Meralco’s current rate of about P1.35 per kWh.

The approved rate is below the P2.34 per kWh sought by the utility.

The adjustment follows the ERC’s approval of a total revenue requirement of about P342 billion for the four-year regulatory period ending June 30, 2030, or 36% lower than the P532 billion requested by Meralco.

A rate reset is the ERC’s periodic review of a distribution utility’s costs, investments, and operating performance to determine the maximum rates it may charge during a regulatory period.

The review covers distribution charges, which pay for delivering electricity through Meralco’s network, and excludes generation, transmission, taxes, and other pass-through charges.

Meralco’s distribution rates were last reset in 2011, with subsequent regulatory periods remaining unresolved.

“After a decade and a half of delay, the current ERC has finally restarted the reset process. This is not only about rates. This brings back discipline and accountability to how distribution utilities operate,” Mr. Juan said.

The latest adjustment forms part of the first regulatory period covering July 1, 2026 to June 30, 2030, under the ERC’s revised rate-setting framework for private distribution utilities.

The ERC said it reduced or disallowed portions of Meralco’s proposed capital expenditures, operating expenses, asset base, and return on capital after finding certain costs excessive, inadequately supported, or not yet necessary.

“We trimmed capital projects that were not yet justified, disallowed excessive operating costs and bad debt provisions, removed contingencies and duplicated assets from the asset base, and used a lower return on capital than what Meralco proposed,” Mr. Juan said.

The regulator said the approved revenue requirement also provides for investments in substations, distribution lines, equipment replacement, and advanced metering.

The ERC said the details of its decision would be contained in the final determination, which is expected to be formally issued shortly.

Meralco, meanwhile, said it would review the decision before assessing its implications for the company and its customers.

“We will need to thoroughly review the decision before commenting further on its impact on the company and our customers,” Jose Ronald V. Valles, Meralco senior vice-president and head of regulatory management, said in a statement on Sunday.

He said the decision would provide greater clarity as Meralco pursues investments to modernize its distribution network over the next four years.

“We likewise appreciate the ERC’s commitment to resolving the long-pending rate reset application as this addresses outstanding regulatory matters and provides stability for the energy industry,” he said.

Consumer group Partners for Affordable and Reliable Energy, meanwhile, called for transparency and consumer participation in the rate-setting process.

Nic Satur, Jr., the group’s chief advocate officer, said rate resets should be “transparent, fair, and inclusive of consumer participation.”

“Consumers have the right to know, scrutinize, and question every cost being passed on to them. Every peso charged must be justified, reasonable, and supported by proper auditing,” Mr. Satur told BusinessWorld.

“Ultimately, rate resets must serve consumer welfare, not simply approve additional cost and higher electricity charges,” he added.

Meralco is the country’s largest private electricity distribution utility, serving more than 8.1 million customers in Metro Manila and surrounding provinces, including Bulacan, Cavite, Rizal, and parts of Laguna, Batangas, Pampanga, and Quezon.

In September, Meralco reduced its overall electricity rate by P0.0409 per kWh to P14.7424 per kWh from P14.7833 per kWh in August.

Meralco’s controlling shareholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls.