MANILA, Philippines -- Beginning next month, power distributor Manila Electric Co. (Meralco) will start collecting additional generation charges of 3.14 centavos per kilowatt-hour (kWh) from its customers, until it has fully recovered P3.37 billion.
According to an order issued by the Energy Regulatory Commission (ERC), this additional generation cost referred to the costs incurred by Meralco in purchasing electricity from the wholesale electricity spot market (WESM), in excess of the mandated 10 percent requirement, plus carrying charges.
This ERC order, in effect, allowed Meralco to recover its WESM purchases that were in excess of 10 percent, during the period August 2006 to May 2007.
Ronald Valles, head of regulatory affairs at Meralco, explained that the power distributor earlier paid these generation costs to WESM in behalf of its customers.
“Meralco had to buy power from WESM during this period to enable it to provide continuous supply of power to its customers. Since the WESM prices are determined in accordance with law and regulations, the ERC deemed these purchases from WESM as prudent and valid,” Valles said in reaction to the latest ERC ruling.
“To mitigate the impact, the ERC allowed the recovery of these costs over a three-year period,” he added.
Valles was quick to add that the additional 3.14 centavos per kilowatt-hour in generation cost—which will be reflected in the consumers' power bill as a separate item in the bill using the phrase “previous months' adjustment on generation cost”—will not necessarily jack up electricity prices next month.
The generation charge, according to him, is expected to go down in October.
In June 2008, the ERC had already denied the petition of Meralco to recover the costs of its electricity purchases from the WESM, in excess of the 10-percent cap.
Meralco, however, petitioned for the partial reconsideration of the commission's 2008 decision. The original amount at that time, minus the carrying charges, amounted only to P2.7 billion.
Meralco noted that its purchases from the WESM were in compliance with law. “To require Meralco or any distribution utility for that matter to limit its energy purchases to exactly 10 percent of its total demand would be impossible and would defeat the objectives of the WESM.”
“The disallowed P2.7 billion representing part of Meralco's generation cost for WESM purchases in excess of the mandatory 10 percent requirement are pass through charges and its disallowance would undermine its viability as a distribution utility,” thepower company had said.
Finding merits in Meralco's arguments, the ERC, in its August 2010 order, had thus reverted the previous ruling, stressing that those WESM purchases were deemed “reasonable and prudent.”
According to an order issued by the Energy Regulatory Commission (ERC), this additional generation cost referred to the costs incurred by Meralco in purchasing electricity from the wholesale electricity spot market (WESM), in excess of the mandated 10 percent requirement, plus carrying charges.
This ERC order, in effect, allowed Meralco to recover its WESM purchases that were in excess of 10 percent, during the period August 2006 to May 2007.
Ronald Valles, head of regulatory affairs at Meralco, explained that the power distributor earlier paid these generation costs to WESM in behalf of its customers.
“Meralco had to buy power from WESM during this period to enable it to provide continuous supply of power to its customers. Since the WESM prices are determined in accordance with law and regulations, the ERC deemed these purchases from WESM as prudent and valid,” Valles said in reaction to the latest ERC ruling.
“To mitigate the impact, the ERC allowed the recovery of these costs over a three-year period,” he added.
Valles was quick to add that the additional 3.14 centavos per kilowatt-hour in generation cost—which will be reflected in the consumers' power bill as a separate item in the bill using the phrase “previous months' adjustment on generation cost”—will not necessarily jack up electricity prices next month.
The generation charge, according to him, is expected to go down in October.
In June 2008, the ERC had already denied the petition of Meralco to recover the costs of its electricity purchases from the WESM, in excess of the 10-percent cap.
Meralco, however, petitioned for the partial reconsideration of the commission's 2008 decision. The original amount at that time, minus the carrying charges, amounted only to P2.7 billion.
Meralco noted that its purchases from the WESM were in compliance with law. “To require Meralco or any distribution utility for that matter to limit its energy purchases to exactly 10 percent of its total demand would be impossible and would defeat the objectives of the WESM.”
“The disallowed P2.7 billion representing part of Meralco's generation cost for WESM purchases in excess of the mandatory 10 percent requirement are pass through charges and its disallowance would undermine its viability as a distribution utility,” thepower company had said.
Finding merits in Meralco's arguments, the ERC, in its August 2010 order, had thus reverted the previous ruling, stressing that those WESM purchases were deemed “reasonable and prudent.”
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