• MERALCO clarifies points raised in Ben Kritz’s report

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    This has reference to the two-part column of Ben Kritz, which came out in your paper on September 2 and 3, respectively. In his column, he claimed that Meralco has for years overstated the value of its assets and replacement costs for equipment and facilites, leading to unjustifiably high allowable rates that it can charge electricity consumers.

    We categorically deny that accusation and we find his claim unfair and devoid of any legal basis. The rates reflected on the customers’ bills are in accordance with existing rules, as allowed by law and set by the regulators. Any rate that a customer pays is based on what is approved by the Energy Regulatory Commission (ERC).

    The rate-making process undergoes a regulatory process where all concerned, including the intervenor cited by the column, are given the opportunity to air and voice their side. Meralco fully recognizes its mandate to obtain the most reasonable and least-cost possible without sacrificing the level of service expected by its customers.

    Meralco always works to ensure that prices are fair. Meralco’s rates today are at seven-year lows. The generation charge, which is a pass-through cost and comprises around half of the bill, has likewise declined over the years. In fact, generation charge for June 2016 is the lowest in 12 years.

    Moreover, Meralco’s distribution charge, which is the only cost that accrues to it, has not changed since July last year after it registered a reduction of 25 centavos per kilowatthour.

    On another note, Ben Kritz also stressed in his article that Philippine electricity rates are higher than the rest of ASEAN. To put the current situation in context and based on a 2012 report by the International Energy Consultants, a research firm based in Australia, electric rates in several neighbouring countries like Thailand, Indonesia, Malaysia, Korea and Taiwan are artificially low due to government policies to provide subsidies of up to 50% to consumers.

    When the government subsidies are added back to retail tariffs, the true cost of electricity in these countries rises to a level that is much closer to Meralco’s. Philippine rates are actually comparable with Singapore and Australia, where electric prices reflect actual cost of electric service.

    With these explanations, we hope we are able to clarify any misimpression in the public’s mind that may have been caused by the column of Mr. Kritz. We also hope that you can publish this letter in the interest of fair play and transparency.

    Thank you.

    Respectfully yours,

    Joe R. Zaldarriaga
    Public Information Office
    MERALCO

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    5 Comments

    1. Larry Villanueva on

      I think for as long as supply cannot meet demand our electricity problem is chronic, the only solution therefore is for the govt to promote more power generation capacity by supporting the construction of more power plants preferably cheap coal, can also pitch to try nuclear.

    2. Subsidies must sound tempting, but if we’re going to cite Thailand, Indonesdia, etc. as success stories, how about including Venezuela? Subsidized electricity will only prompt consumers to use more of it, but as the demand rises, the already short supply will try and fail to match it leading to brownouts. Better to use subsidies for health or education, or for tax reform. Deregulation of electricity with rates determined by the market is the only practical way of modern economies, not fans of nationalization like Venezuela.

    3. It would have been ideal if an html ‘link’ pointing to Ben Kritz report has been included on this page. I have read that report and I could say that Meralco’s denial at paragraph 2 above is half baked. This letter from Meralco is insufficient rebuttal to Ben Kritz report. Hopefully the attention of ERC will be drawn into this issue.

    4. What a great reply. The Public Information Office stating that if the subsidies of the Thailand, Indonesia, Malaysia, Korea, and Tawiwan Governments are added back, it brings the cost “much closer”, but fails to say how close. Great explanation and one that fails to impress me. If it is all about rules and regulations, why doesn’t Meralco try to renegotiate fairer and simpler rules? Though I find my thinking has already answered that question.

      • Yes and He also cites Singapore and Australia but these are first world countries with a first rate service provided. Hardly a term you would attribute to Meralco with all the brownouts etc. Trying to compare apples with oranges or in Meralco’s case, lemons.

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