ERC approves lower Meralco rate for 2012-15

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WEDNESDAY, 08 JUNE 2011 21:04 PAUL ANTHONY A. ISLA / REPORTER

CUSTOMERS of Manila Electric Co. (Meralco) may see their electricity bills go down next month after the Energy Regulatory Commission (ERC) decided to slash the power retailer’s maximum annual price or its average distribution charge for the regulatory year 2012 to 2015.

The ERC move comes just a day after Meralco said its generation charge would increase.

In its final determination, the ERC said it approved Meralco’s revenue application for its third regulatory period on Monday, which indicated a drop in Meralco’s maximum annual price for 2012 to 2015 from P1.5828 per kilowatt-hour (kWh) in 2012 to P1.5817/kWh in 2015.

The approved rate for 2012 is lower than the prevailing approved rate of P1.6464/kWh and a substantial reduction from the prices Meralco applied for—which ranged from P1.7056/kWh to P1.9036/kWh.

Meralco filed its application on June 18, 2010, and following a series of public hearings conducted from July to November last year, the ERC said it approved Meralco’s revenues for 2012 to 2015 at P45.106 billion, P47.248 billion, P46.953 billion and P50.251 billion, respectively. The regulator calculated the maximum annual price for the three years using the approved revenues, as well as Meralco’s sales forecast for the period.

The ERC said the approved annual revenues took into consideration Meralco’s efficient operating costs, including taxes and duties other than income tax, return on its invested capital, depreciation allowance, underrecoveries for the previous regulatory period, and net efficiency adjustments for each of the four years of the regulatory period.

The ERC said it also calculated the allowable return on capital for Meralco using a regulatory weighted average cost of capital of 14.97 percent—down from the 16.27 percent used in Meralco’s previous rate reset application.

The ERC added that it also disallowed certain projects in Meralco’s proposed capital expenditures for not being fully justified, which contributed to a significant drop in the figures for the return on capital component of Meralco’s approved revenues.