ERC asked to clarify its decision to grant Meralco rate hike bid

Businessman and consumer advocate Raul T. Concepcion is seeking an explanation from the Energy Regulatory Commission (ERC) on the latter’s recent decision granting Manila Electric Co. (Meralco) a 17-centavo rate hike under the generation rate adjustment mechanism (GRAM).

Concepcion, chairman of the Consumer and Oil Price Watch (COPW), said while they acknowledge that the rate increase will be revenue-neutral on Meralco’s part, they still need to clarify some issues on the ERC approval.

He said the COPW would ask the ERC for a breakdown of the cost of electricity that Meralco purchases from the National Power Corp. (Napocor) and independent power producers (IPPs) First Gas, Quezon Power and Duracom.

The COPW chief said they also would like to see the breakdown of Meralco’s fuel mix and type — hydro, coal, natural gas, geothermal, oil-fired thermal units and combined cycle units. The group will seek information on these components for the period from February to May.

"The above breakdown will help the COPW appreciate how the composite rate of 17 centavos was arrived at," Concepcion said.

He said based on his experience in the monitoring of the oil prices, it would be easier for the consumers to understand the reason for the price adjustments if these were done on a monthly basis.

Under the GRAM cost of recovery, the price changes over a four-month period are lumped in an aggregate amount which would be effectively reflected three months later.

"If oil prices stabilize in September, consumers will get mad as the basis for the recovery will be the July to September oil prices where they are at their peak levels," he said.

Concepcion will also propose to the ERC a comparison of monthly changes and the current six-month lag time, citing their effect to the consumer.

Last Aug. 20, the ERC gave Meralco the go-signal to implement a new generation rate of P0.1737 per kilowatthour (kwh) effective September 2004, the third time Meralco applied for a revision in its generation cost since the inception of the GRAM mechanism.

Under the Electric Power Industry Reform Act (EPIRA), a power distribution utility can adjust its GRAM on a quarterly basis.

The change in Meralco’s generation rate stemmed from the recovery in its carrying charges under the Deferred Accounting Adjustments (DAA).

DAA is a cost component in the generation rate intended to recover or refund generation costs incurred during the test period.

However, the ERC said the adjustments in carrying charges were tempered by the downward generation cost based on the test period covering the period from February to May 2004.

ERC chairman Rodolfo Albano Jr. was quick to point out that the increase is just a recovery on the part of Meralco. "Meralco is merely collecting from its customers the reasonable costs imposed upon it by its power suppliers. This does not give Meralco additional income. The GRAM is a recovery mechanism on the cost of power it purchased," he explained.

"The viability and continued supply of safe, adequate and reliable, and quality electric service for the people is of the essence," Albano added.