Meralco eyes P500 million from PBR scheme

MANILA, Philippines - Power utility Manila Electric Co. (Meralco) said it expects to generate P500 million in additional revenues from the implementation of the newly-approved performance-based rate (PBR) mechanism.

Meralco treasurer Rafael Andrada told reporters that the projected revenues will start coming in from June until December this year. The company started the implementation of the PBR last month.  

Based on the rate schedule approved by the Energy Regulatory Commission (ERC), the distribution and supply charge is set at P1.2227 per kilowatt-hour, an increase of 25 centavos from 2008’s 96.57 centavos average rate.

Andrada said some of the revenues that are coming in from PBR implementation were supposed to be carried out last year.

“The rate adjustment this year is actually a combination of the past two years already. It’s not only the impact for the year, but in reality it should have been normalized for last year’s revenue. In other words, a part of this should have been given last year and a part this year,” he said.

Meralco, along with other distribution utilities, filed before the ERC, in August 2006, a petition proposing the replacement of its rate-setting mechanism from RORB to the PBR methodology.

This is mandated by Section 43 of Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA), which calls for the establishment and enforcement of “a methodology for setting transmission and distribution wheeling rates and retail rates for the captive market of a distribution utility, taking into account all relevant considerations.”

In 2005, the ERC adopted the PBR for distribution utilities (DUs) to adopt internationally accepted rate making methodologies.

The PBR strives to achieve a balance between efficient price levels, allowing utilities efficient revenue to ensure their sustainability, and maintaining or improving network service performance levels.

ERC said the rate setting scheme also provides strong incentives to improve the operational efficiencies of DUs.

It noted that international experience (Australia and United Kingdom) with its built-in mechanisms for incentives and fines depending on the utilities’ performance, PBR leads to reductions in the real price of electricity distribution while improving service levels.