The Energy Regulatory Commission clarified that no law imposes a 12 percent ceiling on the allowable rate of return of distribution utilities, following reports on a complaint filed before the Office of the Ombudsman alleging that the Commission allowed Manila Electric Company to earn beyond the supposed limit.
In a statement, the ERC said it respects the legal process and is ready to answer the complaint before the Ombudsman.
However, the Commission stressed that neither the Electric Power Industry Reform Act nor the Public Service Act sets a 12 percent maximum rate of return.
The ERC said the laws require only that electricity rates be “just and reasonable” and authorize the Commission to adopt internationally accepted rate-setting methodologies.
According to the ERC, the 12 percent figure cited in the complaint came from the pre-EPIRA Return on Rate Base system. This was later replaced by the internationally accepted Performance-Based Regulation framework, which uses the Weighted Average Cost of Capital.
The Commission also said the Supreme Court has upheld both the PBR framework and the ERC’s authority to approve WACC rates above 12 percent.
The ERC added that it has taken steps to address delays in formal rate resets by issuing resolutions requiring distribution utilities to account for missed reset years and refund any over-recoveries to consumers. It said it has also adopted new rules to ensure timely rate reviews in the future.
ERC Chairperson and CEO Atty. Francis Saturnino C. Juan said the Commission recognizes public concerns over electricity rates, but emphasized that there is no legal 12 percent cap that the ERC ignored.
Juan said the ERC remains committed to transparent, accountable, and lawful regulation of the country’s power sector while protecting consumer interests.