01 August 2007
MERALCO, the country’s biggest electric distribution utility, has the highest distribution charges in the country compared with other distribution utilities in urban centers like Davao and Metro-Cebu.
A comparative study done by the Freedom from Debt Coalition (FDC) revealed that the Lopez-family controlled-Meralco which serves the Philippines’ largest economic region of Metro-Manila and the highly industrialized Calabarzon provinces and distributes 70% of the country's power consumption, charges residential and commercial customers P1.6615 per kWh in distribution charges. They also charge P0.5271 for supply service and P0.2435 per kWh for metering fees.
Comparatively, the FDC study showed that consumers in Metro-Cebu are being charged by Visayan Electric Company (VECO) only P1.0773/kWh for distribution, P0.2712/kWh for Supply Services, and P0.1924/kWh for metering services. Based on the total of these three revenue items that go to the distribution utility, Meralco's charges are higher by 57.8% or P0.89 per kWh than VECO.
In Davao City , FDC said, “consumers are charged by the Davao Light and Power Co. only P1.2409/kWh for distribution, zero for supply services, and P0.2249 per kWh for metering services. This shows that Meralco's charges are 60% or P0.9663 per kWh higher than Davao Light.”
Data used by FDC came from the electric bills of consumers in those cities.
Power industry experts who served as resource persons of FDC in analying the electric bills in those cities said: "This doesn't make sense because of a lot of economic and financial and operations advantages that Meralco enjoy such as the following:
- The Meralco franchise area is larger, more modern, and more compact. Meralco has more customers per square kilometer of area or per kilometer of distribution lines. Their distribution costs per customer therefore should be a lot less than the much smaller cities of Cebu and Davao .
- Meralco has a system demand of 5,400 megawatts compared with 280mw for Cebu and 250mw for Davao. In fact all the other distribution utilities in the country combined will not be even half of the Meralco size."
"Being a huge distribution facility which wields a lot of clout, Meralco could demand lower prices for a lot of the supplies and materials it needs for their distribution service. Of course, if its main concern is providing the lowest or cheapest power rates to its consumers as the public franchise that the government gave it demands,” the experts added.
“Indeed, there are no technical and economic reasons why Meralco's charges for its services should be more expensive. The disparity is just too big." said FDC.
FDC suspects that Meralco's rate base (valuation of the assets that the utility is supposed to be using to provide the distribution services) is bloated. “Meralco have already been accused before of padding its rate base by adding non-essential and luxury assets such as the maintenance cost of the Rockwell property that it eventually turned into a multi-billion shopping area, the Meralco theater and gymnasium, and a luxury estate in Antipolo that has been made to look like a training center but is actually a profit center as other private companies pay to use it.”
“Apparently, using a new rate-setting methodology, the Energy Regulatory Commission is, in effect, allowing Meralco a 15.2% return on rate base which appears to also include the corporate income taxes of Meralco – a practice that is unfair, unjust, and against the law,” said FDC.
Currently, the average per kilowatthour charge in the monthly bills of Meralco’s residential and commercial customers is P11.50 per kWh.
On distribution charges alone, Meralco appears to be overcharging its customers by about P0.90 per kwh. It is equivalent to P180 per month for those using 200mwh and P900 per month for those using 1,000 kwh a month, not to mention the additional cost brought about by the 12% value added tax on distribution charge. -30-