Meralco won't borrow this year - official

MANILA, Philippines - Manila Electric Co. (Meralco), the country’s largest power distributor, has no programmed borrowings this year, a ranking company official said.

Meralco treasurer Rafael Andrada explained that they do not see an immediate need to tap the debt market for funds.

He added that for this year, the company is not expecting any major payments for its loans.

“For 2010, we will pay about P1 billion to P2 billion. I think we can manage to pay that with our internal cash flow,” he said.

Andrada said they have already alloted funds for their capital expenditure for the year.

The capex for 2010 will be between P7.9 billion to P8.1 billion, about the same as the P7.9 billion capex allocated in 2009.

This budget, he said, is enough to meet the company’s system loss target for the year of 8.5 percent.

He admitted that meeting the 8.5 percent system loss target is a “big challenge” for the company.

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 distribution utility (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 Energy Regulatory Commission (ERC) for implementation starting this year directly translates to a lower system loss charge for end-users whose DUs are incurring system losses above the mandated cap.

For the past five years, Meralco was able to steadily bring down its system loss. From 11.51 percent in 2004, this was brought down to 10.58 percent in 2005, 10.46 percent in 2006, and 9.99 percent in 2007.

The 2008 system loss level was below the 9.5 percent cap prescribed by the ERC.

In 2010, however, the ERC has ruled that all DUs, including Meralco, should bring down their system loss cap to 8.5 percent from the current level of 9.5 percent.

The ERC also reduced the cap on the system loss of electric cooperatives (ECs) from 14 percent to 13 percent.

The ERC noted that the existing system loss cap of 9.5 percent for DUs has not been adjusted since 1999 or nine years while the cap of 14 percent for the ECs was unchanged since 2000.  The new system loss caps took effect last month.

Technical, non-technical and utilities’ electricity consumption are allowed to be recovered from consumers. Any loss in excess of the caps is absorbed by the utilities.

This means that the more the caps are lowered, the more utilities would have to shoulder system losses unless they improve the efficiency of their operations.

Meralco earlier said 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.