Meralco cuts Jan. rate hike by 90%

By Riza T. Olchondra 
Philippine Daily Inquirer 
6:11 am | Friday, March 21st, 2014 

MANILA, Philippines—The Manila Electric Co. (Meralco) has reduced its proposed power rate increase for January to about a tenth of the original, following a recalculation ordered by the Energy Regulatory Board of the unusually high electricity spot market rates late last year. 
According to Meralco spokesman Joe Zaldarriaga, the company’s deferred rate increase in January was cut down to 45 centavos per kilowatt hour, or just a tenth of the original P4.56 per kWh. 
Including taxes and other charges that adjust relative to the generation cost, the proposed rate increase came to P5.33 per kWh. 
Meralco said that it had now recomputed the rate increase at 65 centavos per kWh, or 88 percent lower than P5.33 per kWh (taxes and other charges included). 
If approved by regulators, Meralco’s customers will have to pay the additional generation charge and related taxes. 
For a typical household with a monthly consumption of 200 kWh, this would translate to a charge of only P11.71 per kWh, instead of the original P16.39 per kWh. 
The generation charge is the line item that shows the cost of power that Meralco pays to power plants for the previous month’s supply. 
Distribution utilities like Meralco are allowed to pass this charge on to consumers automatically under current rules but the ERC is consulted when the rates become unusually high, as happened in December. 
First vice president and head of legal William S. Pamintuan said Meralco will submit the recalculated rates for January to the ERC. 
The submission will effectively amend the company’s pending application to stagger the original increase of P4.56 per kWh over six months. 
The process will include a public hearing, Pamintuan said, after which the ERC is expected to set the final rate. 
Only after the ERC sets the final rates will Meralco recover the deferred charges, Pamintuan said. Meralco originally sought to reflect P10.23 per kWh generation charge in the January billing, but only collected P5.67 per kWh (maintaining the prevailing generation rate and deferring the P4.56 rate increase), from customers starting in December in response to public protests. 
Meralco officials said the company arrived at the new reduced rate after having received the Philippine Electricity Market Corp.’s (PEMC) recalculated rates for the Wholesale Electricity Spot Market (WESM), as well as the recomputed cost of replacement power for the Sual and Masinloc power plants that is reflected in the January billing. 
The effective WESM rate for the November to December 2013 supply month went down from P36.08 per kWh to P8.33 per kWh after the PEMC recalculation. The PEMC is the operator of the WESM. 
Pamintuan said Meralco will seek guidance from the ERC on how it can recover the adjusted charges for the January billings. Meralco officials clarified that the recalculations will only cover the January billings and not yet the December billings because of the temporary restraining order issued by the Supreme Court that month, which effectively kept the generation rates at the prevailing P5.67 for the month. Ongoing refund Pamintuan said there is an ongoing refund (through bill credits) to customers that inadvertedly paid for the deferred increase in December. 
Of Meralco’s total 5.5 million customers, about 7 percent, or 430,000 customers, received bills stating the deferred amount. 
Of those who got that type of bill, about 8 percent or 37,000 had apparently paid the deferred amount. On March 5, Meralco officials announced that the refund would be made through adjustments in customers’ future bills. 
The unprecedented increase in the generation charge resulted from a temporary tightness in power supply when the Malampaya natural gas plant went on a temporary maintenance shutdown in November. 
The situation was exacerbated by the decision of several power plants to also go on unplanned shutdowns at around the same time. 
The supply tightness drove price surges at the WESM, where Meralco and even some generation firms buy power to meet any shortfall in their electricity requirements. 
Amid the public protests, the Supreme Court issued a temporary restraining order against the unconscionably high generation charge that Meralco wanted to impose last December. The ERC subsequently ordered the PEMC to recalculate the spot prices at the WESM based on a 12-month average preceding the Malampaya shutdown. 
In an order dated March 3, the ERC told PEMC to recalculate “unjustified” and “uncompetitive” market rates late last year. 
Last Tuesday, the PEMC released new Luzon-wide prices that would apply to Meralco and other power distribution companies. 
Energy Secretary Carlos Jericho Petilla, in a text message, welcomed the lower deferred increase in generation charges. 
“It (new rate) will certainly help the consumers especially if it is free carry, with no interest,” Petilla said. 
Renato Reyes Jr., secretary general of the militant Bayan Muna, welcomed the new rate as a “product of the people’s fight against abuses” in the power industry. 
However, “we would still want to see how the new rates were arrived at. Those responsible for market abuse should still be held accountable,” he said. 
The People Opposed to Warrantless Electricity Rates (Power) said Meralco’s lowering of the proposed power rate hike was “a good start” in weeding out rate hikes stemming from the anomalous spike in electricity prices in November and December last year. source