NASECORE Challenges Meralco’s Proposed Electricity Rate Increase Before ERC
Consumer Group Raises Key Legal and Regulatory Issues in ERC Case No. 2026-016 RC
The National Association of Electricity Consumers for Reforms, Inc. (NASECORE) has formally submitted its Pre-Trial Brief before the Energy Regulatory Commission (ERC) in ERC Case No. 2026-016 RC, raising critical legal and regulatory questions regarding the application of the Manila Electric Company (MERALCO) for approval of new distribution rates.
According to NASECORE, the case is not merely about the computation of the Annual Revenue Requirement (ARR) and Maximum Average Price (MAP). Instead, the proceedings involve fundamental legal and regulatory issues that must first be resolved before any rate increase can be approved.
Meralco Seeks Approval of Higher Distribution Charges
In its application, MERALCO is seeking approval of a Maximum Average Price (MAP) of approximately ₱2.3436 per kilowatt-hour (kWh) for Regulatory Year 2027 under the new Performance-Based Regulation framework.
This represents a proposed increase of approximately ₱0.9914 per kWh, or about 73% higher than the ₱1.3522 per kWh rate previously recomputed and approved by the ERC under ERC Case No. 2015-112 RC.
NASECORE emphasized that such a significant increase requires strict scrutiny of the regulatory assumptions and financial inputs used by the applicant.
Supreme Court Ruling on Asset Valuation Must Be Addressed
A central issue raised by NASECORE concerns the valuation of MERALCO’s Regulatory Asset Base (RAB).
The Supreme Court decision in NASECORE vs. ERC (G.R. No. 226443) declared the use of the Optimized Depreciated Replacement Cost (ODRC) methodology in valuing electricity distribution assets void, ruling that such a method could result in unjust wealth transfers from consumers to shareholders.
The High Court directed the ERC to adopt a lawful valuation methodology consistent with the statutory requirement that electricity be delivered in the least-cost manner.
Because the current application relies on a Regulatory Asset Base estimated at approximately ₱358.9 billion, NASECORE argues that the Commission must first determine whether this asset base complies with the Supreme Court directive.
Major Cost Drivers Behind the Proposed Increase
Based on the application, the proposed rate increase is driven by several major regulatory inputs, including:
- Opening Regulatory Asset Base (RAB): approximately ₱358.9 billion
• Proposed Weighted Average Cost of Capital (WACC): 14.6%
• Projected Capital Expenditures (CAPEX): approximately ₱272.2 billion
• Forecast Operating Expenses (OPEX)
• Regulatory depreciation and taxes
• Various price smoothing adjustments
NASECORE stressed that each of these components must undergo a full prudence review to ensure that only efficient and justified costs are passed on to electricity consumers.
Key Issues Raised by NASECORE Before the ERC
In its Pre-Trial Brief, NASECORE asked the Commission to resolve several important issues, including:
- Compliance with the Supreme Court Decision
Whether the Regulatory Asset Base used by MERALCO complies with the directive of the Supreme Court invalidating the ODRC valuation methodology.
- Legality and Transparency of the ₱358.9 Billion Asset Base
Whether the Opening RAB has been lawfully and transparently derived through a verifiable roll-forward from prior regulatory periods.
- Implementation of Refund and Reconciliation Mechanisms
Whether over-recoveries, refunds, and reconciliation adjustments required under ERC rules have been properly implemented.
- Justification of the Proposed Rate Increase
Whether the proposed ₱0.9914/kWh increase is supported by prudently verified regulatory inputs, including the proposed 14.6% WACC and projected capital expenditures.
- Sensitivity Analysis of Key Financial Assumptions
Whether adjustments to WACC, RAB, CAPEX, and OPEX materially affect the resulting electricity rates.
- Compliance with the Least-Cost Mandate
Whether the proposed expenditures and regulatory parameters comply with the legal requirement that electricity be delivered to consumers at the least cost.
- Fair Allocation of Distribution Charges
Whether the translation of the MAP into distribution rates for different customer classes is supported by transparent cost-of-service analysis and does not result in unjust or discriminatory charges.
Protecting Consumers from Unjustified Rate Increases
NASECORE emphasized that approving the proposed rate increase without resolving these threshold legal and regulatory issues risks perpetuating regulatory outcomes inconsistent with Supreme Court directives and consumer protection principles under the Electric Power Industry Reform Act (EPIRA).
The organization reiterated that electricity is an essential public service, and therefore regulatory decisions affecting millions of consumers must be based on transparent, lawful, and prudently verified cost structures.
NASECORE Calls for Transparent and Lawful Rate Regulation
As the proceedings continue before the Energy Regulatory Commission, NASECORE called on regulators to ensure that electricity rates remain fair, transparent, and compliant with the law.
The consumer group reaffirmed its commitment to actively participate in regulatory proceedings to protect the interests of Filipino electricity consumers and to ensure that the least-cost mandate under EPIRA is faithfully implemented.