₱5.2B Rate Hike Denied in 2022—Will the Decision Backfire on Consumers
- April 3, 2025
In July 2024, the Supreme Court ruled that San Miguel Corporation (SMC) could cancel its power supply agreements (PSAs) with Meralco. The company maintained that unexpected changes, like rising fuel prices, made these deals too expensive to continue.
With this decision, SMC is now asking the Energy Regulatory Commission (ERC) for permission to recover ₱34 billion in extra costs from 2022.
If the ERC approves SMC’s request, electricity prices could go up, and consumers may end up paying the difference.
(Also read: Meralco Refund Update: What Consumers Need to Know)
SMC’s Price Hike Battle: A Timeline
In 2022, SMC and Meralco jointly petitioned the ERC for a ₱5.2-billion rate increase, which would have resulted in a ₱0.30 per kilowatt-hour (kWh) adjustment over six months.
They argued that unforeseen events—such as limited Malampaya gas supply, fuel price spikes due to global conflicts, and Indonesia’s coal export ban—had driven coal costs from $60 to $440 per ton. These factors, they claimed, met the “change in circumstance” criteria outlined in their ERC-approved contracts.
However, ERC denied this appeal based on a 3-2 vote despite SMC and Meralco’s argument that the proposed rate hike was the most cost-effective option for consumers. They cited data from the ERC’s Regulatory Operations Service (ROS) to support their claim. Their projections warned that rejecting the increase could push consumer costs from ₱5.2 billion to ₱12.6 billion, potentially soaring to ₱25.8 billion.
In November 2022, SMC took the case to the Court of Appeals (CA). In June 2023, the CA overturned the ERC’s decision, ruling that it had committed “grave abuse of discretion” in rejecting the rate hike. T
Following the ruling, SMC filed two petitions with the Energy Regulatory Commission (ERC): one seeking ₱5 billion for March to May 2022 and another for ₱29 billion covering June to December 2022.
Criticism of ERC’s decisions
The National Association of Electricity Consumers for Reforms (NASECORE) questioned the ERC’s decision to deny the 2022 rate hike petition, arguing that while the ERC rejected a modest increase in generation charges by Meralco, SPPC, and SMEC, it tolerated higher generation rates from other suppliers and electric cooperatives.
NASECORE contended that this approach contradicted the “least cost principle” under the Electric Power Industry Reform Act (EPIRA) and did not serve the public interest.
Meanwhile, an article in BizNewsAsia highlighted the controversial nature of the ERC’s split decision to deny the rate increase, noting that such critical decisions are typically unanimous. The piece suggested that the dissenting opinions within the ERC indicated internal disagreements and potential shortcomings in the commission’s decision-making process.
(Also read: EPIRA Reforms: Will They Deliver Affordable & Reliable Power?)
Consumer burden
According to ERC Chairperson Monalisa Dimalanta, the commission is evaluating SMC’s petitions to determine the appropriateness of the cost recovery and its potential impact on electricity consumers.
In an opinion piece, journalist Myrna Velasco noted that even after the ERC rejected the rate hike, Filipino consumers still faced sudden cost increases. The cancellation of power PSAs forced Meralco to seek pricier alternatives, driving up electricity rates. Additionally, retail electricity suppliers (RES) raised their prices due to soaring fuel costs, further undermining consumer confidence in the supposedly competitive market.
The article also mentioned Dimalanta’s acknowledgment that while CA’s initially limited cost recovery to ₱5 billion, the ERC’s unsuccessful appeal allowed SMC to seek a much larger adjustment. Following its Supreme Court victory, the company escalated its claim to ₱29 billion, ultimately leading to the current ₱34-billion petition under ERC review.
Velasco wrote, “At this point, one certainty remains—no matter how the numbers shake out, ratepayers will shoulder the weight of the looming rate hike.”
Sources:
https://tribune.net.ph/2024/09/03/sc-approves-meralco-smc-deal-termination
https://business.inquirer.net/514150/smc-seeks-p34-b-relief-from-soured-meralco-deal
https://mb.com.ph/2025/3/24/from-5-2-b-hike-denial-to-34-b-bill-shock
https://businessmirror.com.ph/2022/10/03/erc-majority-junks-joint-bidof-meralco-smc-for-rate-hike/
https://www.philstar.com/headlines/2022/10/04/2214125/erc-rejects-meralco-smc-rate-hike-petition
https://biznewsasia.com/a-split-decision
https://www.philstar.com/business/2022/11/25/2226213/smc-power-unit-appeals-erc-decision-ca
https://business.inquirer.net/409947/ca-junks-erc-ruling-denying-meralco-smc-rate-hike
https://malaya.com.ph/business/corporate/erc-studying-smc-petition-to-collect-p34b-from-meralco-clients-for-revoked-deals/
