Meralco withdraws 12¢ rate hike petition

To pave the way for a new rate-setting mechanism, the Manila Electric Co. (Meralco) withdrew yesterday its controversial 12-centavo rate hike application with the Energy Regulatory Commission (ERC).

In a disclosure to the Philippine Stock Exchange (PSE), Meralco general counsel Gil San Diego said the company has filed a motion to withdraw application with the ERC.

Meralco said the motion was a result of the ERC’s adoption of the so-called performance based ratemaking (PBR), an internationally-accepted rate setting methodology, as an alternative to the return-on-rate-base (RORB) methodology.

The power utility firm said pursuant to the PBR guidelines issued by the ERC, it has manifested its intent to be one of first five distribution utilities (DUs) to be subject to PBR methodology under Option 1-B, an option that entails the filing of the last application under the RORB methodology not later than May 31, 2005.

Under normal circumstances, Meralco said it would have had two options relative to this application. One option is to supplement the pending application while the other to withdraw the pending application and file a new one.

"In the light of the instruction of the Supreme Court that Meralco ‘begin again on a clean slate’, there could be no question that the withdrawal of the instant petition is the more prudent course of action that applicant should take," Meralco said in its motion.

On Oct. 10, 2003, Meralco sought an increase in its basic rate by 13.6 centavos per kilowatthour (kwh). The ERC, however, issued on Nov. 27, 2003 an order provisionally granting Meralco an average basic rate increase of only 12 centavos.

Consequently, the Freedom from Debt Coalition (FDC) filed with the Supreme Court a petition for, among other things, the annulment of the provisional order by the ERC. On June 15, 2004, the SC tendered a decision granting FDC’s petition.

"The Court ruled that the provisional order was issued with grave abuse of discretion, by and large, because of infirmities which attended the issuance of the provisional order, to wit: the failure of applicant to publish the instant application or at least a summary thereof; the failure of the Commission to resolve the oppositors’ Motion for Production of Documents; and the failure of the Commission to consider arguments adduced by the oppositors, thereby concluding that the provisional order was issued with grave abuse of discretion and thus void," the SC order said.

The ERC and the Meralco eventually filed separate motions for reconsideration but these have not been resolved up to this time.

Meralco said certain developments have overtaken the resolution of the said motions for reconsideration such as the adoption of the PBR.