ERC grants Meralco bid for power rate hike

04/24/2009

The Energy Regulatory Commission (ERC) has granted the petition of the Manila Electric Co. (Meralco) to raise its electricity rates by 25 centavos per kilowatt hour (kwh).

The hike, under the company’s performance based regulation (PBR), will be reflected in its May billing to its customers.

But the ERC said Meralco’s consumers would not feel the increase since the ERC also boosted the refund of Meralco’s currency exchange rate adjustment (CERA) by more than 10 centavos per kwh, bringing the utility firm’s total CERA refund to 14.61 centavos per kwh.

Meralco last month started refunding consumers four-centavos per kwh in abeyance to a Supreme Court order to pay back what the power firm had overcharged in the amount of P3.92 billion.

“In effect, it would still be reduction for customers with the CERA refund,” Ivanna dela Peña, Meralco’s head of Economics and Utilities department, said.

In a ruling released yesterday, the ERC finally approved the petition of Meralco seeking to implement its exact rates under the PBR scheme, for this year.

On Oct. 17 last year, the ERC ruled to defer Meralco’s petition to allow it to implement the PBR after a consumers’ group opposed its implementation.

“The ERC revised downwards its approved rates for residential users by as much as P0.34 per kWh after considering the concerns of various sectors, particularly on the impact of the rate adjustment on the greater majority of Meralco’s customers and the alleged rate distortions coming from Meralco’s distribution costs,” the ERC said in a statement.

In its ruling, the ERC raised Meralco’s maximum allowable price to P1.2227 per kwh, or 25 centavos more than its 2008 average of 96. 57 centavos.

The ERC also set at zero the income tax component of Meralco’s rates to prevent the firm from passing it on to its customers.

“The changes made to the decision on Meralco’s PBR rates to address the concerns and issues of intervenors indeed show that the active participation of consumer groups and other interested parties can go a long way in the decision-making process of the ERC,” ERC Executive Director Francis Saturnino Juan said.

The ERC furthermore said the so-called “lifeline users,” or those consuming 20 kwh and below, would continue to enjoy the 100 percent discount granted them but should pay only the adjusted P5.30 per month metering charge, while the other lifeline customers should enjoy a discount corresponding to the consumption level under the new lifeline program, including the P21 per customer per month minimum charge.

The ERC adopted the PBR for distribution utilities starting 2005, pursuant to its authority granted under Republic Act 9136, or the Electric Power Industry Reform Act, to adopt the internationally accepted rate making system.

The PBR hopes to achieve a balance between efficient price levels, allowing utilities efficient revenue to ensure their sustainability, and maintaining or improving network service performance levels.

The ERC moreover said it also provided strong incentives to improve operation efficiencies of distribution utilities, citing the case of Australia and United Kingdom where over time, with its built-in mechanisms for incentives and fines depending on the utilities’ performance, PBR led to reductions in the real price of electricity distribution while improving service levels.

According to Dela Peña, the approved price adjustment would be their first distribution rate increase in six years since the firm’s last rate hike was in 2003. Meralco filed the PBR application in 2006.

“We’re happy that we can implement it now,” she said.

Meralco president Jose de Jesus said the increase in electricity rates, as a result of the PBR, would compel distribution utilities to improve their performance.

“The increases in power rates are given due to inflation, cost of servicing and higher cost of investments. But the only difference now, I think, is this rate adjustment is also based on the distribution utility’s ability to perform. That shows that there are rewards and penalties for performance and non-performance, respectively,” De Jesus said.

“From the customers’ point of view, we are going to get increases anyway since this is a fact of life. But we just have to make sure that those increases are based on valid grounds. And this one is based on performance. We need to continue the service, otherwise the service will deteriorate,” he added. PNA

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