Meralco allowed to hike rates

Manila Times
The Energy Regulatory Commission (ERC) has allowed Manila Electric Co. (Meralco) to increase its rates to recover previously disallowed electricity purchases at the Wholesale Electricity Spot Market (WESM). 
Meralco, the country’s largest power distributor, now stands to collect from its customers P3.37 billion, inclusive of finance charges, for additional generation cost from August 2006 to May 2007.

The new rates would mean an increase of P0.03 per kilowatt-hour effective in the next billing month until the full amount is collected.

The regulator’s decision stemmed from its earlier order that disallowed Meralco’s purchases at the WESM in excess of 10 percent of its total demand.

That order allowed Meralco to fully recover only 10 percent of its power supply sourced from the spot market as the ERC interpreted this as the mandated cap for WESM purchases under the Electric Power Industry Reform Act of 2001.

Under the law’s implementing rules and regulations (IRRs), utilities may only pass on to their customers generation costs that exceed a pegged National Power Corp. (Napocor) transition supply contract (TSC) rate if these are tied to eligible contracts or WESM purchases. 

This restriction aims to ensure that consumers pay the least for their electricity needs.

Also under the IRRs, utilities are only allowed to source not more than 90 percent of their total demand from Napocor or private power plant operators for the first five years from the establishment of the WESM. 

The market, a trading platform for electricity where prices are settled on the spot by market forces, started in 2006.

But because utilities are not allowed to buy more than 90 percent of their power requirements from bilateral supply contracts, the ERC said in its recent decision that they should not be faulted if the prices they secure from the WESM are higher.

It added that only a utility’s bilateral contract with power plant operators should be capped with Napocor’s TSC rates, not WESM purchases.

“Neither is the ‘mandatory’ nature of the WESM sourcing requirement premised on the condition that these purchases should only be at times when the WESM prices are lower than TSC rates or at times when [Napocor] has still the capacity to offer to the [distribution utilities] under a TSC,” the commission said.         

Euan Paulo C. Añonuevo