ERC okays Meralco power rate hike

The Energy Regulatory Commission (ERC) has approved a 0.054 centavos per kilowatthour (kWh) overall average tariff increase on the Manila Electric Co.'s (Meralco) unbundled electricity rate.

This is way below the P1.12 per kWh unbundling rate petition filed by the Lopez-controlled power firm.

The approved unbundling rate excludes the 0.0875 centavos per kWh increase also to be imposed by Meralco on its customers to recover its deferred purchased power adjustment (PPA). The deferred PPA, amounting to a total of P5.7 billion, will be recovered by Meralco within three years.

The ERC earlier ruled that Meralco could also recover its deferred PPA once the commission approved the unbundling rate petition of the power firm.

In an interview, ERC acting chairperson Leticia Ibay said the increase will not apply to all electricity end-users.

"What we have done is to adopt a different kind of socialized pricing scheme. We have made a graduated percentage discount depending on the customers’ usage. If a consumer is using 50 kW to 400 kW, he can be entitled to a discount. Those under the lifeline rate can have a 50 percent discount," he said.

She said some Meralco customers consuming less than 100 kW or those belonging under the lifeline rate can even enjoy a reduction in rates.

Meralco president Jesus Francisco said they will no longer appeal the approved unbundled rate except for some areas where the ERC did not make any increase like in the so-called loss cap.

"Naturally, we were disappointed but we will implement it starting April," Francisco said. Based on the 104-page order of ERC, Meralco can appeal to ERC within 15 days from receipt of the order. The order was received by Meralco late Friday afternoon.

The National Association of Electricity Consumers for Reforms, Inc. (Nasecore) criticized the ERC for virtually approving another round of rate increase by Meralco, charging that the regulatory body is apparently biased for the private utility firm.

"It is improper for ERC to approve Meralco’s petition for unbundling of rates while there is a pending case before the Supreme Court on a previous rate increase issue. The ERC should have waited for the final decision of the SC first," Nasecore president Pete Ilagan said.

The SC upheld in November last year the 1998 decision of the old Energy Regulatory Board which ordered Meralco to roll back its rates by P0.167 per kWh and refund its customers some P10.8 billion.

Ilagan pointed out that the present rate must first be firmly established with finality before the application for unbundling is approved. Should the Supreme Court affirm the rollback, then the proceedings and approval of the unbundling application would be for naught.

"For the larger interest of Meralco’s 3.1 million customers who stand to lose billions of pesos from any hasty action on Meralco’s unbundling petition, the ERC, instead of approving it, should have either dismissed or suspended any action of Meralco’s application," he said.

"The actions of ERC in a span of two weeks has shown that it has become a lapdog of Meralco. Instead of concentrating on obtaining execution of the decision of the Supreme Court upholding a 1998 ERB order for Meralco to refund its customers an estimated P28-billion in overcharges and to rollback its basic rate by P0.167pkwh, the ERC has sided with the electric utility when it submitted a comment to the High Court to allow Meralco to recover income tax as part of just and reasonable return and rate base (RORB). Now, it has granted Meralco’s unbundling application," Ilagan lamented.

Under a restructured power industry, the so-called PPA will no longer appear in the billings of electricity end-users. The electricity bill will be unbundled into generation, transmission, distribution and supply. The new unbundled rate of Meralco will appear under the distribution charge.

Earlier, the ERC also ordered the use of a new recovery mechanism for fuel and power costs as well as foreign exchange costs.

With the adoption of the new recovery mechanism, the National Power Corp. (Napocor) and distribution utilities like Meralco will stop the implementation of the existing automatic cost adjustment mechanisms- PPA and the currency exchange rate adjustment (CERA) to recoup additional costs of fuel and power and foreign exchange respectively.

The ERC has adopted a new recovery mechanism for fuel and purchased power costs called Generation Rate Adjustment Mechanism (GRAM) and the Incremental Currency Exchange Rate Adjustment (ICERA) for forex, replacing PPA and CERA.

Under GRAM and ICERA, utilities can only pass on these costs to the consumers upon verification and approval of the ERC. This means that the power firms will only recover from consumers costs they actually incurred.

Under the PPA and CERA set-up, power utilities automatically passed on costs to the consumers on a monthly basis before submitting any reports to the ERC for review. Over-recoveries and under-recoveries were subsequently refunded to consumers if the ERC found it necessary. The new recovery mechanisms, on the other hand, allow adjustments in rates in a quarterly basis from the present monthly basis.