Meralco hikes 2010 capex to P8.3 billion

MANILA, Philippines - Manila Electric Co. (Meralco) will increase its capital expenditure next year to meet the 8.5-percent system loss cap prescribed by the Energy Regulatory Commission (ERC).

Meralco president Jose de Jesus told reporters over the weekend that the company would hike its capex to P8.3 billion in 2010 as against nearly P8 billion this year.

“We’re going to spend quite a lot for our capex to improve our system loss performance so we can reduce technical losses,” De Jesus said.

Rafael Andrada, Meralco treasurer, said they have slowed down a little bit in allocating funds for capex this year due to delays in the approval of its rate hike petitions.

But Andrada said with the rate increase granted by the ERC, they would be aggressively set aside more funds for capex.

“Because of rate hike delay, we cut down budget for 2009, but that would be made up in 2010,” Andrada said.

According to De Jesus, the company’s system loss is expected to hit below nine percent this year. However, he said they would still seek reconsideration from the ERC to defer the implementation of the 8.5-percent system loss cap.

“We will have to exhaust all options. We will appeal again but that’s all we can do,” he said.

The ERC earlier denied Meralco’s request to defer the effectivity of the new system loss cap of 8.5 percent starting January 2010 or to increase the new cap to at least nine percent.

The present system loss cap applicable to private distribution utilities (DUs) like Meralco is 9.5 percent.

System loss refers to the total of all energy lost or wasted on a system due to line loss and other forms of energy loss, unaccounted energy use and theft or pilferage, among other factors.

The system loss cap is the limit by which a DU is allowed to recover from its customers the cost of the energy that is delivered to its system by its power suppliers, but which energy is not actually metered as being sold to its customers, either because it is lost in the transmission through the power lines or is pilfered by unscrupulous persons.

The lower system loss cap approved by the ERC for implementation starting next year directly translates to a lower system loss charge for end-users whose DUs are incurring system losses above the mandated cap.

Meralco sought the deferment of the implementation of the new system loss cap of 8.5 percent, citing its difficulty in meeting this lower cap. The power firm earlier estimated that for every percentage point above the cap set by the ERC translates to a loss of about P1.8 billion for the country’s largest distribution utility.

The power firm said the economic slowdown that allegedly affected its sales to industrial customers and the expected increase in the propensity to pilfer under the current economic environment as one reason for the request for deferment.

But ERC said: “It is true that the sharing of electricity consumption between the industrial consumers that are connected to high voltage and residential consumers that are connected to low voltage has an effect on the total system loss. However, it should be noted that both the existing and the proposed new caps were set regardless of whether or not the franchise area is highly urbanized.”

Early this year, Meralco’s system loss went down to 9.16 percent. But with a number of power interruptions brought about by the recent weather disturbances, Meralco has expressed fears the system loss levels may suffer.

For the past five years, Meralco was able to steadily bring down its system loss. Starting at 11.51 percent in from 2004 its system loss went down to 10.58 percent in 2005, 10.46 percent in 2006, and 9.99 percent in 2007. The 2008 system loss level of Meralco was below the 9.5 percent cap prescribed by the ERC.