Rate adjustment merely a pass-on cost – Meralco

The Manila Electric Co. (Meralco) clarified yesterday that the rate adjustment it is seeking with the Energy Regulatory Commission (ERC) is purely a pass-through cost, not a rate hike application. 

"We would like to clarify that the adjustment we filed before the ERC is not a Meralco rate increase but merely to recover adjustments in both the December 2006 and January 2007 generation and system loss charges," Meralco president and chief operating officer Jesus P. Francisco said in a statement.

He said the P1.73 per kilowatt-hour rate increase reported in the papers represents the cumulative adjustment under the proposed generation charges for December 2006 and January 2007. This merely reflects the cost of electricity purchased for the supply months of November and December 2006.

Meralco merely collects what it is billed by its power suppliers which include the National Power Corp. (Napocor), the wholesale electricity spot market (WESM) and the independent power producers (IPPs) and are reflected in consumers’ bills as pass-through charges.

"I also would like to assure the public that this is merely just a cost-recovery mechanism and revenue-neutral in so far as Meralco is concerned. We never gain a single centavo from changes in the cost of power supply that is passed on to our customers," Francisco said.

Francisco said the increase in the generation charge was mainly due to the high cost of power supply from WESM and to mitigate the impact of this increase.

In its application before the ERC, Meralco proposed that "WESM bills for the affected months be recomputed at Napocor’s time-of-use (TOU) rates, similar to the process undertaken by the ERC for the third and fourth month of WESM commercial operations".

The Meralco chief said they have already paid Napocor, the IPPs, and WESM for the power they supplied in November and December 2006 which the applications seek to recover. Sellers to the WESM are mainly Napocor and the Power Sector Assets and Liabilities Management Corp. (PSALM).

"Since Meralco now has to make monthly filings for adjustments in its generation and system loss charges, there is now a lag of about five months from the time the cost is incurred and its subsequent recovery from customers," Francisco said.

"A subsequent filing to recover cost in January 2007 was for a generation charge of P4.6078 per kwh for February 2007. This is significantly lower than the generation charge applied for January 2007 of P6.4221 per kwh to recover cost in December 2006," he said. 

Meralco said the underrecovery for both December 2006 and January 2007 amounted to over P5 billion. power sector regulator.