Meralco to recoup P3.3B

Written by Paul Anthony A. Isla / Reporter

WEDNESDAY, 22 SEPTEMBER 2010 13:13

CUSTOMERS of Manila Electric Co. (Meralco), the country’s largest power distributor, could expect an increase in their electric bills starting next month. The Energy Regulatory Commission (ERC) has allowed Meralco to recoup P3.371 billion in underrecoveries from its excess purchases from the Wholesale Electricity Spot Market (WESM). Lawyer Francis Saturnino Juan, ERC executive director, said in an interview the approved amount to be recovered by Meralco will have a rate impact of P0.0314 per kilowatt-hour (kWh). “Meralco customers [are] assured that the ERC [will] continuously monitor the collection of the said amount every month,” he said. Joe Zaldarriaga, Meralco external communications manager, said the P0.0314/kWh rate impact of the P3.371-billion underrecovery will be offset by the downtrend in generation charge owing to the favorable weather conditions that will allow hydroelectric power plants in Luzon to run at its full capacity. The cost of power sold by the generating companies can move from month to month based on many factors beyond its control, like fuel prices, working condition of the power plants and WESM prices, among others. Although the ERC allows Meralco to recoup the P3.371 billion, which is inclusive of carrying charges over a period of three years, Juan explained the amount could be fully recovered even ahead depending on Meralco’s sales volumes. “We actually allow them [Meralco] to reflect the P0.0314/kWh rate impact of the P3.371-billion underrecovery until such time it fully recovers the said amount,” the ERC official said. Juan said its latest order pertains to the full cost of Meralco’s WESM purchases in excess of 10 percent of its total requirement. Among the issues raised in its earlier motion for partial reconsideration, Meralco asked the ERC whether it can purchase more than 10 percent of its requirements from the WESM. After reviewing the arguments of Meralco, the ERC said it is convinced there is merit in revisiting the legal bases cited in support of the adoption of the 10-percent cap policy. Besides Section 23 of the Electric Power Industry Reform Act (Epira), which obliges distribution utilities to source their power requirements at the least cost, the ERC said there are other relevant provisions in the same law, in the Epira’s implementing rules and regulations (IRR) and in the WESM Rules, that can be applied to determine whether or the distribution utilities’ generation costs, based on their WESM purchases, should be allowed full recovery. The ERC also directed Meralco to submit, within 10 days from its initial implementation, a sworn statement indicating its compliance with the aforesaid directive; reflect the generation charge as a separate item in the bill using the phrase “Previous Months’ Adjustment on Generation Costs”; and accomplish and submit a report in accordance with the attached prescribed format, on or before the 30th day of the month until the amount shall have been fully recovered. Lawyer Ronald Valles, Meralco head for regulatory affairs, said in a text message that Meralco already paid these generation costs to WESM on behalf of its customers. Valles said his company had to buy power from WESM during the period to enable it to provide continuous supply of power to its customers. “Since WESM prices are determined in accordance with law and regulations, the ERC deemed these purchases from WESM as prudent and valid,” Valles said. To mitigate the impact, Valles pointed out the ERC allowed the recovery of the costs over a three-year period. “Incidentally, the generation charge is expected to go down in October,” he added. Meralco said the generation charge accounts for about 60 percent of the customer’s average monthly power bill, which goes directly to its power suppliers and not to Meralco itself.