Meralco set to spend more amid lower rates

Business Mirror
SUNDAY, 29 JANUARY 2012 22:35 PAUL ANTHONY A. ISLA / REPORTER


THE Manila Electric Co. (Meralco) is ready to invest more in the next three years amid the slightly lower distribution rates set by the Energy Regulatory Commission (ERC).


In a presentation, Ivanna de la Peña, Meralco first vice president, said the company was likely to invest P42.6 billion even in the face of a slightly lower distribution rate of P1.58 per kilowatt-hour (kWh) in the next three years, as set by the ERC. Meralco had spent P33.8 billion while its distribution rate averaged P1.6464/kWh from 2008 to 2011.


Meralco’s distribution rates for the next threae years will be based under the ERC’s performance-based regulation (PBR) rate-setting mechanism.


The ERC evaluated and determined Meralco’s forecast energy sales and demand, proposed performance standards, and annual revenue requirement and maximum average prices.


De la Peña said Meralco’s approved distribution rates in the next three years will go down from P1.5828/kWh in 2012, P1.5824/kWh in 2013, P1.5821/kWh in 2014 and P1.5817/kWh in 2015. The ERC said it disallowed certain projects in Meralco’s proposed capital expenditures for not being fully justified. This contributed to a significant drop in the figures for the return-
on-capital component of Meralco’s approved revenues, as compared to what it proposed in its application.


The ERC also adopted a more stringent performance-incentive scheme than that proposed by Meralco, ordering it to observe the approved performance indicators and giving it the appropriate incentives to improve its services.


Amid these rates, de la Peña said the increased spending is in light of the company’s forecast of steady growth in electricity demand that has to be commensurate through distribution-capacity investments. She said Meralco’s latest estimates showed that its customer base continued to grow at 3.3 percent to 5.01 million last year, from
4.85 million in 2010; energy sales grew by only 0.8 percent to 30,489 gigawatt-hours last year from 30,247 GWh in 2010.


In 2010, Meralco’s energy sales grew by 9.9 percent to 30,247 GWh from 27,516 GWh in 2009 as its customer base also grew by 3.1 percent to 4.85 million from 4.7 million in 2009. “Initially, we requested for a much higher distribution rates but were capped,” Oscar Reyes, Meralco senior executive vice president and chief operating officer, said.
Reyes said Meralco will have live within these approved rates and will just have to be more efficient and effective and must make ensure they give the best service.
Even with the lower distribution rates, Reyes said they have already defined major investment projects that include upgrades of distribution facilities, such as transformers, substations, poles, wires as well as reaching out to nearby and newer areas.


“We all recognize the difficulties of not having adequate and reliable power supply. Thus, our aim is to provide adequate, reliable, and quality power all throughout the year,” Reyes said.