Meralco to challenge ERC decision

The Manila Electric Co. (Meralco) will ask the Energy Regulatory Commission (ERC) to clarify some issues regarding the latter’s decision to approve a 5.40-centavo per kilowatthour (kWh) average overall tariff increase under the power firm’s unbundled rate petition.

"There are several inconsistencies in the ruling which may be the subject of corrections that the ERC said would be forthcoming this week," Meralco legal counsel, Wigberto Tañada, a former senator said.

Meralco received the ERC’s 104-page decision last Friday afternoon.

Based on the order, Meralco would be allowed to increase its electric billing rates to consumers by an average of 22 centavos per kilowatthour, a much smaller amount from the P1.12/kwh average rate hike asked by the company.

Tanada said pending these corrections and clarifications of some portions of the decision that Meralco intends to seek from the ERC, company officials said they are consulting its legal counsel and creditors on the appropriate steps to take.

"We are disappointed by the outcome of the decision. It has been more than nine years since Meralco was allowed to adjust its rates, way back when the exchange rate was less than P28 per US dollar," he said.

He said, "after taking almost three years to evaluate the petition we felt that the regulator would finally allow us a fair and reasonable return on our investments. In the last six years alone, Meralco invested more than P40 billion in its electric distribution system."

Energy Secretary Vincent S. Perez said they respect the ERC decision. "The petition has been decided. On the ERC’s point of view, the rate increase is justified. We respect ERC’s decision," he said.

"This will give some breathing space with regard to its financial obligations and as an aftermath of this ruling. We will continue to urge Meralco to strive to make its operation efficient," Perez said.

Meralco corporate secretary and general counsel Camilo Quiason said they are "still studying" the ERC’s decision covering the company’s application for rate unbundling and its subsequent implications to the continued viability of the Lopez-controlled utility firm.

The amount of increase has been estimated to cause electric bills to rise by at least 5.4 centavos beginning April. The ERC also allowed the company to charge its end-users 8.75 centavos/kwh a month so it could recover deferred purchased power cost of P5.7 billion. This increase will not translate to additional revenues for Meralco since it covers the cost of power purchased from independent power producers.

However, Quiason said Meralco officials "have already noted several material inconsistencies in the decision" although these may still be subject to corrections the ERC said its would make this week.

"Pending corrections by the ERC and its clarifications of some portions of the decision that Meralco intends to seek from the Commission, Meralco is in consultations with its legal counsel and its creditors on the appropriate steps to be taken with respect to the unbundling decision," he added.

Meralco had petitioned for a rate hike three years ago but was acted only recently acted on by the ERC.

In place of the rejected petition, the ERC ordered the implementation of a socialized pricing mechanism designed to shield low-income residential customers from the effects of any increase in rates.

Commercial, industrial, and high usage residential customers, meanwhile, will receive modest increases in their electricity bills. This increase, in the ERC’s opinion, should allow Meralco to continue to operate viably within an acceptable profit limit.

The marginalized end-users with consumption of zero to 60 kWh, accounting for 21 percent of total residential customers, will enjoy a substantial reduction averaging 30 percent (P1.51 per kWh) in their distribution charge.

Household users with consumption from 91 to 400 kWh, comprising approximately 58 percent or two million of the total 3.5 million residential customers of Meralco, are expected to see no change in their distribution charge.

The distribution charge of upper middle class and upper class residential users consuming more than 400 kWh per month, on the other hand, will rise by about 5.6 percent. Consumption of this segment accounts for about 30 percent of total residential usage of electricity. –With a report from Conrado Diaz Jr.