Press Release
June 17, 2021

Hontiveros issues ultimatum to ERC over "anomalous, exorbitant" WACC rates

Senator Risa Hontiveros has issued an ultimatum to the Energy Regulatory Commission (ERC) to act on the "anomalous and exorbitant" rate of the weighted average cost of capital (WACC). The senator says these computations have been adding up to the consumer's electricity bill for five long years.

The senator says the agency has been remiss in lowering the charge for WACC to fair and realistic levels since 2015.

"Limang taon na tayong tinataga sa pasentimo-sentimong singil nitong WACC. Dapat matagal nang natugunan ng ERC ang hinaing na pababain yan sa isang makatarungang presyo. Abot ng milyones kapag pinagsama-sama ang lahat ng nakulekta nila. ERC, get your shop in order," Hontiveros said.

The senator insists, WACC rates, which are basically the return a company expects on the capital it has invested in a business, should have been lowered much earlier in order to temper other new arising issues of power rate hike and adjustments amidst the pandemic.

The statement comes as the National Grid Corporation of the Philippines (NGCP) claimed a price increase could allegedly be in the offing if more ancillary services or reserves were requested for the grid.

"Naghigpit ng ang sinturon ng lahat, lalo na ngayong pandemya. At imbes na makatulong, lalo pa raw tayong pahihirapan ng NGCP pagdating sa pagdukot sa ating mga bulsa. Maraming paraan para maibaba pa ang napakamahal na presyo ng kuryente sa ating bansa, pero mas hinihintay pa yata ng ERC ang isang consultant na hindi pa nila ma-hire kaysa pakinggan na lang ang hinaing ng mga kababayan nila," Hontiveros stressed.

"The ERC should have already acted on reducing the excessive WACC rate of 15% for NGCP and 14.97% for Meralco, which are way higher compared to the WACCs of Indonesia at 2.3%, Malaysia at 7.5% and Thailand at 7.2%. All the more that we should start the investigation on the cost structure of electricity in our country under the ERC and the failed promises of EPIRA to reduce power costs," she added.

She adds, once it is proven that the NGCP failed to comply with the transmission development plan despite raking in profits through the WACC under the transmission charges, then the government should consider taking back the whole transmission sector of the power industry, which according to her, "should not have been privatized in the first place".

Hontiveros said that a system of strict oversight must be established so that only individuals who possess utmost integrity, discipline and professionalism would be allowed to operate the national power grid.

"Taking back control of our main power grid system requires a system of strict oversight by the state. It also entails choosing the right people to manage the whole system. Abuses and corruption are not and should never be tolerated, whether you are from the private or public sector. Let's reclaim our interest in our national power grid," Hontiveros concluded.

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