Electricity Industry in the Philippines

The electricity sector in the Philippines provides electricity through power generation,

transmission, and distribution to many parts of the Philippines. The Philippines is divided into
three electrical grids, one each for Luzon, the Visayas and Mindanao.1 However, about 12% of
Filipinos have no access to electricity. The Philippines is also one of the countries in the world that
has a fully functioning electricity market since 2006 called the Philippine Wholesale Electricity
Spot Market (WESM) and is operated by an independent market operator.

Power Generation
Power generation in the Philippines is not considered as a public utility operation, which means
interested parties do not need to secure a congressional franchise to operate a power generation
company. However, power generation is regulated by the Energy Regulatory Commission (ERC)
who must issue a certificate of compliance to interested parties to ensure that the standards set forth
in the Electric Power Industry Reform Act of 2001 (EPIRA) are followed.[5] The ERC is also
responsible for determining any power abuse or anti-competitive behavior.
Electricity in the Philippines is produced from various sources such as coal, oil, natural gas,
biomass, hydroelectric, solar, wind, and geothermal sources. The allocation of electricity production
can be seen in the table below, according to data from the Department of Energy Power Statistics

Sources of Electricity in the Philippines

0.05%

13.30%
Coal
Oil-Based
Natural Gas
Hydro 11.80%
42.80%
Geothermal
Other Renewable Sources
(Wind, Solar, Biomass)

24.20%

7.40%

Power Transmission
Power transmission in the Philippines is a common carrier business (i.e. regulated by the
government, serves its franchise area without discrimination, responsible for any losses incurred
during delivery). It is regulated by the ERC who has rate-making powers and the final say in the
valuation of transmission assets. Pursuant to the Electric Power Industry Reform Act (EPIRA) and
the Transmission Development Plan or TDP,[12] maintenance and operations of the nationwide

1
https://en.wikipedia.org/wiki/Electricity_sector_in_the_Philippines
transmission system was subjected to competitive public bidding conducted by the Power Sector
Assets and Liabilities Management (PSALM).

Currently, The National Grid Corporation of the Philippines (NGCP) is the transmission system
operator for three grids constituting the Philippine grid and as a franchise holder and transmission
service provider, it is in charge of operating, maintaining, and developing the country's state-
owned power grid,[27] controls the supply and demand of power by determining the power mix through
the selection of power plants to put online.

Power Distribution
The circulation of electricity to end-users is a controlled common carrier business requiring a
national franchise.[28] The power to grant national franchises is exclusively vested to the Congress of
the Philippines. Distribution of electric power to all end-users or consumers of electricity may be
handled by private distribution utilities, cooperatives, local government units presently undertaking
this function and other duly authorized entities, under the regulation of the ERC. A distribution utility
has the task to provide distribution services and connections to its system for any end-user within its
franchise area, as there are different distribution utilities available for different areas, consistent with
the distribution code. 

Retail rates charged by distribution utilities are subject to regulation of the ERC under the principle of
full recovery. Under full recovery, distribution utilities subdivide their retail rate into two distinct
categories, namely pass through charges and wheeling charges. Pass through charge follows the
principle of full economic recovery where a distribution utility may pass on all the charges it incurred
in the distribution of power such as the price of the power, transmission charge, systems loss
charge, etc. to its customers. The wheeling charge is an additional premium charged to the customer
akin to a mark-up on the cost of power acquired by the distribution utility. The wheeling charge
follows the principle of reasonable return on base (RORB) which allows the distribution utility to
operate viably as determined by the ERC.

According to the National Electrification Administration (NEA), the distribution sector is composed of

119 electric cooperatives, 16 privately owned utilities and six local government-owned utilities as of
2009. Currently, Meralco is the Philippines' largest distribution utility with a franchise area of 9,337
square kilometers covering Metro Manila, the entire provinces of Bulacan, Rizal and Cavite, parts of
the provinces of Laguna, Quezon and Batangas, and 17 barangays in Pampanga. The franchise
area is home to 23 million people, roughly a quarter of the entire Philippine population of 89 million.
Power distribution outside the Metro Manila area is handled by private distribution utilities and
electric cooperatives.
Distribution Sector

119 Electric Cooperatives

16 Privately owned utilities

6 Local government owned utilities

About the company

The Manila Electric Company (“Meralco) is an electric power electric power distribution company in the
Philippines. It is Metro Manila's only electric power distributor and holds the power distribution
franchise for 22 cities and 89 municipalities, including the whole of the National Capital Region and
the exurbs that form Mega Manila. It was originally known as Manila Electric Railroad and Light
Company, which was the company's official name until 1919.2

Meralco is the largest private sector electric distribution utility company in the Philippines
covering 38 cities and 73 municipalities. Its franchise area of over 9,685 km2 is just 3% of the
total land area of the Philippines, but accounts for 55% of the country’s electricity output.
Meralco celebrates 119 years of service in 2022, committed to providing reliable and affordable
energy.3

Notes:

 119th year in service (as of 2022)

 9,685 km2 franchise area
 7.5 million customers

Meralco is listed in the Philippine Stock Exchange (ticker: MER). It debuted as a publicly-listed
company in the Philippine bourse on January 8, 1992.

Meralco serves Metro Manila, where it is the sole electricity distributor, as well as some nearby
provinces, like Bulacan, Cavite, Laguna, Batangas, Rizal, Quezon. Bulacan, Cavite, and Rizal are
solely served by Meralco, but on some provinces, it only serves some parts, like in Laguna,
Batangas, and Quezon, where most or some areas are served by electric cooperatives.

Mission Vision Values

OUR VISION

2
https://en.wikipedia.org/wiki/Meralco
3
https://company.meralco.com.ph/corporate-profile#:~:text=Meralco%20is%20the%20largest%20private,of
%20the%20country's%20electricity%20output.
To be a world-class energy solutions provider, powering our nation and empowering our
people today and for generations to come.

OUR MISSION

To provide our customers the best value energy solutions—reliably, affordably, superbly, and
sustainably.

OUR VALUES

 EXCELLENCE

          Excellence is our way of life. We strategize brilliantly, decide resolutely, and

execute flawlessly.

 CUSTOMER CENTRICITY

          Our power comes from our customer who is our reason for being. We deliver
outstanding customer experience. We live for our customer, the community, and our
country.

 SUSTAINABILITY

          Sustainability is core of all we do. We work to preserve our planet, to empower our
people, to power our communities, and to create prosperity for all.

 INTEGRITY

          We value ethical behavior and employ good governance practices that meet global
standards.

 INNOVATION

          We are passionately innovative, leveraging technology to constantly improve our

operations and to provide better customer and employee experiences.

 MALASAKIT

          Sa lahat ng aming tungkilin at gawain, lubos ang pagbibigay ng sarili. Tunay na

malasakit ang nasa puso namin, bilang mga tagapaghatid ng liwanag.

 BAYANIHAN

          Mahal namin ang aming kapwa at kababayan. Sa lahat ng oras, handa kaming
tumugon, tumulong, at maglingkod.

History
1903
Established as Manila Electric Railroad and Light Company to provide electric light and power
and an electric street railway system to Manila and its suburbs. The facilities that Meralco built
to provide these two services represented for many years the largest single investment of
American private capital and know-how in the whole of East Asia.

For a little more than four decades, Meralco provided Manileños their first modern mass public
transportation system with electric streetcars. These were supplemented by buses in the 20s. 
    

 
1948
World War II destroyed the railway system beyond rehabilitation. The electric service powered
much of the postwar rehabilitation and early industrialization of the young republic, which
gained independence in 1946.
    

 
1961
In a move considered daring at the time, a group of Filipino investors, led by the entrepreneur
Eugenio Lopez Sr., bought Meralco from its American owners, the first major American
enterprise to be 'Filipinized.' During the decade that followed, the new Filipino management
built electric-generating and distributing facilities at an unprecedented pace to meet the
burgeoning needs of its franchise area. This was made possible by earning the confidence of
international credit institutions like the Ex-Im Bank of the United States, the Ex-Im Bank of
Japan, the International Finance Corporation (IFC), Kreditanstalt fur Wiederaufbau (KFW), and
other banks, insurance companies, and major American, German and Japanese suppliers.

Meralco was the first Philippine company to issue mortgage trust indenture bonds successfully
in the US financial market on Wall Street. Meanwhile, an enlightened human resource
management regime ensured industrial peace and employee loyalty at home.
    

 
1969
Meralco became the very first billion-peso company in the Philippines. This was all the more
remarkable because much of it had been achieved without recourse to government
guarantees.

    

 
1970
The Philippine Government made it a state policy for the government to own all major
generating facilities. Meralco sold its generating plants to the National Power Corporation, and
electric distribution became its core business. Indeed, in the first half of the 1980s, Meralco's
franchise area tripled in area from 2,678 square kilometers to 9,337 square kilometers, mainly
because provincial consumers preferred the rates and service of Meralco to every other
alternative. 
    
 
1980
Meralco, upon the request of the government, organized, started up and operated the
country's first elevated light rail transit (LRT) system in Manila between Baclaran and Caloocan.
It was reminiscent of the prewar role of Meralco in the city's streetcar system. 

At the end of the decade, Meralco turned over the efficiently functioning system to the
government.
    

 
1995
More than ever, much of Meralco's management has been directed towards enabling the
organization to react nimbly to the changing structures and environments in which it operates,
despite its continuing status as one of the oldest and biggest Philippine companies. Drives have
gone under different names and slogans, e.g, TQM, re-engineering, Meralco Transformation
Program, etc., but they share certain common emphases: customer satisfaction, world-class
efficiency and productivity, performance-driven rewards, good corporate citizenship,
transparent good governance, and process, organizational and human resource development
towards these values.

 
 
2009
Major stock transactions took place and Meralco partnered with two other giant Philippine
conglomerates, the PLDT and San Miguel groups. These synergistic partnerships not only led to
increased business opportunities and cost reductions, but also to new, expanded and more
affordable services.

Guiding Leadership

Our Board of Directors is primarily responsible for the governance of the Company. Corollary to
setting the policies for the accomplishment of the corporate objectives, Meralco Board also
provides an independent oversight on Management through the Management Control Policy.
Towards this end, our Board ensures that it reviews and approves major projects, policy
decisions, annual budgets, major investment funding, and major restructuring of core
businesses on a fully informed basis, in good faith, with due diligence and care, and in the best
interest of the Company.   

Our Board of Directors consists of eleven (11) directors who are elected by the stockholders
during the Annual Stockholder’s Meeting (ASM) held every second last Tuesday of May. 
Organization Structure

Our Management is primarily accountable to the Board of Directors and is responsible for
Meralco’s successful implementation of the corporate strategy and direction. Management is
represented by a Management Committee (ManCom) composed of the corporate officers and
executives headed by the President and CEO.

Ownership/ Meralco Shareholding Structure

Prospective

Background

Context

Environment
In January 2022, President Rodrigo Duterte signed into law Republic Act 11646 that aims to
spur microgrid development in unserved and underserved areas nationwide to achieve the
government's goal of 100 percent electrification in the country.[2]

Industry

Firm

• Businesses of Meralco and its subsidiaries consist of:

• Regulated and Unregulated segments of the energy supply chain: consist of electricity
distribution, power generation, retail electricity supply, and management of electric
distribution facilities.

• Engineering design services

• construction and consulting services

• payment fulfilment and bills collection services

• after-the-meter and energy management services

• and telecommunication and information technology services.

• As a distribution utility (“DU”), MERALCO holds a 25-year congressional franchise under Republic
Act (“RA”) No. 9209 valid through June 28, 2028 to construct, operate, and maintain the electric
distribution system in the cities and municipalities of Bulacan, Cavite, Metro Manila, and Rizal
 and certain cities, municipalities and barangays in the provinces of Batangas, Laguna, Pampanga,
and Quezon.

• The Energy Regulatory Commission (“ERC”) granted MERALCO a consolidated Certificate of

Public Convenience and Necessity (“CPCN”) for the operation of electric service within its
franchise area, which shall be valid within the franchise period.