Power rates up this month

MANILA, Philippines - More than four million customers of Manila Electric Co. (Meralco) will experience an increase in their power bills this month.

This is an offshoot of an approval by the Energy Regulatory Commission (ERC) for Meralco to carry out an average adjustment of 26.90 centavos per kilowatt-hour (kWh) in its distribution, supply and metering charges as part of the performance-based rate setting scheme.

In a disclosure to the

Philippine Stock Exchange (PSE), Meralco said an ERC order on March 10 but docketed March 31, 2010, will bring the metering, distribution and supply fee of the power firm to P1.4917 per kWh from the previous rate of P1.2227 per kWh.

The last increase in charges Meralco had was in May last year with a 25.70 centavo per kWh increase, the first time in six years that it was granted an upward adjustment.

Based on the ERC order, it approved a new rate schedule that will remove all rate distortions and better ensure that no cross-subsidies remain, except for lifeline rates.

Prior to the eventual phase-out and removal as mandated by Section 74 of the Electric Power Industry Reform Act (EPIRA), cross-subsidies existed and were allowed in the rate structures of utilities.

Consistent with the mandate of the EPIRA to gradually remove this type of subsidy, ERC set Meralco’s inter-class cross-subsidy charges during the three-year phase-out period from June 2003 to October 2006.

The imposition of the additional rates is expected to last for four years and as soon as the full amount of the under-recoveries is recovered, Meralco shall desist from further collecting the same.

The inter-class cross-subsidy charges assumed certain kWh consumption and sales level in subsidizing other classes, similar to the lifeline charge.

The lifeline charge subsidizes the discounts in the electricity rates which Meralco gives to its lifeline customers. This charge is fixed based on a certain assumed kWh consumption for the lifeline customers and kWh sales to the non-lifeline customers.

The kWh consumption and sales per month varies from the fixing of the lifeline charge. When the amounts collected from the lifeline customers are not sufficient – either because there was an increase in the kWh consumption of the lifeline customers or a reduction in the kWh sales to the non-life customers or a combination of these factors – Meralco is constrained to shoulder the shortfall.

Based on the approved new rate schedule, residential customers with consumption of up to 200 kWh will have a rate of 85.47 centavos per kWh while those with 201-300 kWh will pay P1.2298 per kWh.

The rate adjustment was supposed to be carried out early this year but was deferred due to some petitions filed by various consumer groups.

On Jan. 25, ERC asked Meralco to comment on the motion filed by the National Association of Electricity Consumers for Reforms Inc., Federation of Las Piñas Village Association and Federation of Village Association on the maximum average price (MAP) of Meralco for regulatory period 2010 and translation of MAP for RY 2010 into distribution rate structure for its various customer classes with a prayer for the issuance of a provisional authority.

In the motion filed by Robert Mallilin, he alleged that Meralco intends to mitigate the increase for residential customers by assigning more increases to the commercial and industrial customers.

To dispute Mallilin’s allegation, Meralco said its residential customers have the highest distribution charge rate on a per kWh basis among the different customer classes.

“A uniform percentage increase applied on high base rates will naturally result in huge increases for residential customers. On the other hand, if rate increases are based on a uniform percentage increase, the industrial customers, having the lowest average distribution charge per kWh rates, will naturally experience lower increase. The approved rates applied a uniform average per kWh increase for all customer classes for the distribution charge,” Meralco said.

In its order, ERC said “the commission considers the proposal of engineer Mallilin to be reasonable, that is, for Meralco to come up with a program for the removal of inter-class subsidy as a result of the rate adjustments until such time that the rates for each customers class become reflective of true costs.”

ERC noted that “Meralco, in fact, conforms to the proposal. However, as previously declared by the commissions, modifications to the current rate structure may only be done at the start of the next regulatory period. This will be considered in the subsequent reset application of Meralco.