Meralco, ERC to meet on deferred PPA

The Manila Electric Co. (Meralco) will meet with the Energy Regulatory Commission (ERC) to determine how the power firm will collect the P7.3 billion deferred purchased power adjustment (PPA).

"We have to meet with them (ERC) so we will know the manner of computing the deferred PPA," said Meralco assistant vice president and head of utility economics Ivanna dela Pena.

Dela Pena said the power rate adjustment brought about by the P7.3 billion deferred PPA would come on top of the P1.12 per kilowatthour (kWh) unbundling generation rate application still pending with the ERC. "This (deferred PPA) is entirely different from the unbundling rate petition," the Meralco official said.

According to dela Pena, they would know how to collect the deferred PPA once the commission decides on Meralco’s unbundling rate application.

The ERC issued an order last Dec. 23, 2002 which effectively lifted the cease and desist order (CDO) on Meralco’s deferred PPA.

The CDO, which was issued by the ERC in April 30, 2002, allowed the electricity customers of Meralco to enjoy a 38 to 40 centavos per kilowatthour reduction in their PPA effective June 2002.

In issuing the CDO, the ERC questioned Meralco’s move to automatically collect the deferred PPA. "Said deferment of PPA is a deviation from the formula approved by the then ERC under ERB Case No. 2000-168," it said.

But after a thorough evaluation, the ERC said "the commission hereby confirms Meralco’s PPA computations from January 2000 to September 2002."

In a five-page order, ERC, however, did not say if the 38 to 40 centavos power rate reduction will be the same rate of increase that would be imposed by the power utility firm on its customers once it is allowed to collect the deferred PPA.

The ERC, in its order, allowed Meralco to collect only P7.3 billion as against its total deferred PPA claim of P9.2 billion covering the period January 2000 to September 2002. Under-recovery means revenues that were not realized due to its inability to pass on cost to customers.

While allowing it to collect P7.3 billion, the ERC said Meralco has to defer the collection of some P1.5 billion worth of transmission line fees that had been charged by Meralco under its deferred PPA.

This means that while waiting for ERC’s verification of the P1.5 billion, Meralco will only be allowed to collect from its customers only P5.7 billion.

The ERC explained that the discrepancy between the computation of Meralco and the commission was due mainly to issues related to pilferage recoveries. "In computing the amount of pilferage recoveries to be included in its PPA computations, Meralco deducted the expenses it incurred in its anti-pilferage campaign," the ERC said.

The commission, however, believes that Meralco‚s pilferage recoveries should be deducted in full from its PPA computations. The said policy is in accordance with Section 2, Rule X of the Implementing Rules and Regulations of Republic Act. No 7832, otherwise known as the Anti-Pilferage Act of 1995. "Section 2. The full amount recovered by the utility or cooperative under the preceding section shall be reflected as a reduction in the customer’s electric bill through the automatic cost adjustment formula abovementioned, the application of which shall be verified and confirmed by the Board through an order," ERC cited, in its order.