Meralco forecasts P1-B net income this year

Philippine power firm Manila Electric Co. (Meralco) forecast yesterday a net profit of P1 billion this year despite a Supreme Court ruling against a tariff hike.

Meralco president Jesus Francisco said the company would still exceed its net profit last year of P907 million on the back of higher sales and an earlier rate hike that took effect middle of last year.

"We see profit growth because of the rate increase last year, plus the expected growth in energy sales," Francisco said.

P1 billion in net profit this year is a "workable target," added Meralco comptroller and senior vice president Daniel Tagaza.

Francisco said Meralco may ask the Supreme Court to reconsider its decision declaring a rate hike authorized for Meralco late last year as illegal.

The court ruled that the state power regulator, the Energy Regulatory Commission (ERC), committed a "grave abuse of power" when it allowed Meralco to provisionally increase its distribution rates.

The court said the ERC reached the decision without conducting a public hearing, thus preventing the public from opposing the rate.

The ERC clearance would have allowed Meralco to raise rates by 12 centavos per kilowatt hour this year. The Supreme Court, however, ordered it to "observe the status quo."

The utility had expected the tariff increase to boost revenues by P1.9 billion annually and help it undertake projects to improve its service and pay off loans.

Meralco, which retails electricity in Metropolitan Manila and nearby provinces, is already under previous orders to refund an estimated P30.5 billion to customers which regulators ruled had been overcharged in the 1990s.

Without the rate hike, he said they would have to stick to the P5.75 billion capex budget for the year but will try to continue to provide good service to their customers.

"We assure of continuous service of Meralco. The quality of service will not change and will try to do our best with whatever budget we have," he said.

Francisco also clarified that in case they will be ordered to refund whatever they have collected from their customers from the Jan. 1 to 15, a period when the company effected the increase before it was stopped by the SC, it would only amount to not more than P90 million.

"Meralco is, of course, saddened by the overturning of the provisional increase and, in the next few days, we will consult with our lawyers and await Energy Regulatory Commission (ERC) action, to determine what legal steps should be taken on the decision," he said.

Meralco legal counsel Alfonso Lacap, on the other hand, said filing a motion for reconsideration could be an option.

Ivanna dela Pena, Meralco head of utility economics, said the company’s application for 13.6 centavos rate hike will continue to be lodged with the ERC.

"The SC pertains to the provisional authority and it does not prevent the ERC from evaluating our application," she said.

Under the Electric Power Industry Reform Act (EPIRA) of 2001 or Republic Act 9136, ERC has 75 days to issue a provisional order and one year from the issuance of such provisional authority to decide with finality the rate petition.