(DP 2025-02) Promoting Competition and Regulatory Reforms in Franchising Electricity Distribution

Abstract

This paper examines the implications of renewing Meralco’s electricity distribution franchise, which was recently extended for another 25 years. Several unresolved competition and regulatory issues challenge the alignment of this extension with the Electric Power Industry Reform Act (EPIRA) of 2001. Key concerns include Meralco’s dominant market position, cross-ownership with generation companies, potential franchise creep, and its influence in the retail market. The paper advocates for structural reforms such as competitive franchise auctions, stricter cross-ownership limitations, and the possible division of Meralco’s service areas to promote market efficiency and consumer welfare. It also proposes granting the Energy Regulatory Commission (ERC) the authority to oversee franchise bidding and to enforce more rigorous monitoring of market behavior. The findings emphasize that automatic renewal without reforms risks entrenching monopolistic practices and foregoing opportunities for improving transparency, competition, and efficiency in the electricity distribution sector.

JEL Codes: L94; L51; L41