Meralco sets performance-based incentive scheme for customers

MANILA, Philippines - Lopez-controlled Manila Electric Co. (Meralco) will start to implement the so-called Guaranteed Service Levels (GSLs) indicators under the performance-based rate (PBR) mechanism.

Meralco president Jose de Jesus said this is one feature in the PBR which the public would be assured of high-level performance from the distribution utility.

Under the GSL, customers will be compensated if Meralco is not able to meet performance thresholds in duration and frequency of power interruptions, restoration time and connection time.

This means that a customer will receive monetary compensation depending on the degree of service given by Meralco.

“Utilities are rewarded or fined depending on actual performance and when they are fined, the cash out is credited to the customer concerned,” he said.

This is one feature, de Jesus said, which will work on the benefit of both Meralco and its customers as the power firm will strive its best so as not to breach these levels and if breached, customers will be appropriately compensated.

“Central to the process is the utility’s commitment to meet customer requirements at prescribed and guaranteed service levels,”he said.

He said PBR also provides incentives to distribution utilities to optimize the use of existing and future assets and to reduce costs without sacrificing service delivery. 

“This is in contrast to the cost-plus regulation under the return-on-rate-base (RORB) regime,” he said.

PBR also calls for the implementation of Performance Incentive System (PIS) in which a utility firm will receive incentives if it will be able to meet some indicators such as containing system loss, interruption frequency rate, probability of voltage levels, average time to process application, average time to connect premises, and call center performance.

Meralco was the latest addition to the first wave of entrants placed under PBR, alongside Cagayan Power and Light Co. (Cepalco) and Dagupan Electric Copr. (Decorp)-which implemented PBR-based rates in October 2008.

Cotabato Light, Iligan Light and Mactan Electric are also implementing PBR this May 2009.

PBR is widely practiced for the wires business in the US, UK, Australia and New Zealand.

The Energy Regulatory Commission (ERC), the country’s power sector watchdog, has placed Meralco under the PBR effective May this year.

Meralco, under the PBR, has been allowed by the ERC to increase its distribution charges by an average of 25.7 centavos per kilowatthour (kWh).