STA. ROSA City Representative Dan Fernandez on Tuesday listed what he said were grounds to reject renewal of the Manila Electric Company’s franchise, including the utility’s failure to provide updates on its weighted average cost of capital (WACC), which is a key factor that determines power rates.

Fernandez, House Energy Committee vice chair, said under the law that granted the Meralco franchise—RA 9209–the utility giant is required to submit every four years a report on its WACC.

The Meralco WACC remains at 14.97 percent since 2010.

Fernandez said to hit the WACC target of Meralco, power rates have to move upwards and stay high.

He said Meralco’s 14.97 percent WACC set in 2010 was no longer accurate.

Consumers, he said, are burdened by power rates that are among the highest in the world because of Meralco’s WACC, which had been approved by the Energy Regulatory Commission (ERC).

He said he found six cases that the ERC approved at that time which allowed Meralco to adjust its maximum average price.

“This is where the wrong WACC of 14.97 percent is based,” Fernandez said.

He said the WACC should have been just 8.27 percent so a rate of P1.35 being charged to consumers should be lower.

“Basically it was legitimized by ERC at that time,” Fernandez said.

He said there are two rate-setting processes—confirmation and performance-based.

He said the ERC failed to fulfill its mandate to provide the least cost possible to consumers by allowing Meralco to adjust rates almost at will.

“On the part of ERC , that should have been adopted to lower the cost of electricity,” Fernandez said. “Not to use the methodology to raise rates.”

“The function of ERC is to regulate and this is being abused and not complied with. Why?” he lamented.

“ERC must protect consumers. Meralco must provide electricity at the very least cost,” the legislator said.

“But it’s not being done,” Fernandez said.

For these reasons, he said instead of renewing the Meralco franchise, it should be split into three “to allow real competition.”