Energy Regulatory Commission to decide on Meralco rate bid this month

MANILA, Philippines - The Energy Regulatory Commission (ERC) is expected to decide this month on Manila Electric Co.’s application for performance-based rate (PBR) mechanism, which pegs a distribution utility’s pricing on its performance.

ERC executive director Saturnino Juan told reporters yesterday the commission is now in the final stages of its review of Meralco’s application.

“We have studied all the arguments raised by the National Association of Electricity Consumers for Reforms. We are ready to present it to the commission and after the evaluation of the commission en banc, we will release the decision,” Juan said.

Meralco had earlier warned that further delays in the implementation of the PBR would redound to much bigger burden to its customers.

“The delay in implementation of the PBR makes it more expensive for consumers,” Meralco president Jose de Jesus said.

It would be recalled that the ERC had already approved the PBR rate of Meralco but decided to defer the implementation of such, pending the resolution of some issues lodged by some consumer groups.

The Meralco chief admitted that while they want their customers to realize that the PBR will result to better service, they have to wait for the approval of the ERC.

Based on the approved maximum allowable revenue (MAR) under the PBR for 2009, Meralco could charge customers P1.36 per kilowatthour (kwh).

But to be able to minimize the impact of such, Meralco could only collect P1.23 per kwh, the balance of which will be carried over the next revenue period.

“The ERC has a formula where you cannot get the full amount petition. They have something called side-constraints. There is an element in the equation that will cushion the impact to consumers. For instance, instead of P2 per kwh, the rate the ERC would approve will be P1.20 per kwh or something else. The difference will be carried over and subjected to side constraints,” De Jesus said.

Meralco vice president and head of utility economics Ivanna dela Pena explained that this rate mechanism is proven to have worked well in other countries so there is no reason for Meralco customers to worry about the impact of such new system. PBR is now being used in UK , Australia and the US.

“The reason there are objections is that it is perhaps because they still don’t have a full grasp and understanding of the process and principles and the objectives. That is why we take pains in explaining. Opposition usually springs from lack of understanding,” she said.

Under the proposed PBR, Meralco would increase its distribution charge to P14.49 per kwh. 

The PBR was being proposed to be implemented last November 2008 but the ERC decided to defer its implementation after customer groups and the Department of Trade and Industry (DTI) lodged various complaints against the PBR application.