ERC cuts Meralco revenue
Manila Electric Co. (Meralco) will have to operate under a tighter revenue ceiling over the next four years after the Energy Regulatory Commission (ERC) slashed its proposed revenue requirement by P190 billion.
Citing a 9 October decision, the regulator said Saturday that it authorized Meralco to collect P342 billion in distribution revenues from July 2026 to June 2030, or 36 percent below the P532 billion sought by the country’s largest power distributor.
The regulator also approved an average distribution rate of P1.48 per kilowatt-hour (kWh) for the first regulatory year, significantly lower than Meralco’s proposed P2.34 per kWh.
The P0.86-per-kWh difference translates to P172 for every 200 kWh of electricity consumption, although this is a comparison against Meralco’s proposed rate and does not represent an automatic reduction in customers’ existing bills.
First distribution reset in 15 years
The ruling is Meralco’s first distribution rate reset in 15 years, which ended a prolonged regulatory delay that left its allowable revenues and distribution charges without a comprehensive review since 2011.
The ERC said it reduced or rejected portions of Meralco’s proposed capital expenditures, operating expenses, asset base, and return on capital after determining that some costs were high, insufficiently justified, or not immediately necessary.
“This Final Determination shows that the ERC did not simply accept what was applied for. Meralco asked for P532 billion in revenue over four years. We approved P342 billion — P190 billion, or 36 percent, less,” ERC chairperson and CEO Francis Saturnino C. Juan said.
“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. Every peso allowed has to be prudent, efficient, and necessary, because consumers pay for it.”
Substantial Meralco investments approved
Despite the reductions, the regulator approved substantial investments in new substations, distribution lines, replacement of aging equipment and advanced metering systems.
These projects are intended to strengthen Meralco’s distribution network, improve reliability and reduce system losses.
The ERC said the approved P1.48-per-kWh rate was also below the P1.60 to P1.98 per kWh range proposed by intervenors during the proceedings.
Price-shock mitigation measures applied
The Commission applied price-shock mitigation measures under its rules to cushion consumers from abrupt adjustments following the prolonged absence of a rate reset.
“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,” Juan said.
“The approved revenue gives Meralco a clear path to operate more efficiently and to roll out the capital projects needed for a more reliable network, including new substations and lines, modernized metering, and measures to bring down system loss. Meralco will be held to deliver these results,” he added.
Meralco will also face closer regulatory scrutiny under the ERC’s Performance Incentive Scheme, which rewards or penalizes distribution utilities based on reliability, power quality, and customer service.