Meralco assures reliable service amid tight spending

MANILA, Philippines - Manila Electric Co. (Meralco) assured yesterday a continued reliable service despite lower approved distribution rates for the next three years.

“We will have to work within the approved expenditure levels while maintaining our service commitments to our customers,” said Ivanna dela Peña, Meralco’s head for regulatory management.

The Energy Regulatory Commission (ERC) on June 6 ordered Meralco to collect 6.36 centavos per kilowatthour for the regulatory period 2012 to 2015 which is lower than the prevailing maximum average price (MAP) for the year 2011 of P1.6464 per kwh under the performance-based regulation (PBR) scheme.

The PBR is a rate-setting scheme based on a utility’s quality of service to its customers and allows power utilities like Meralco an annual adjustment on its tariffs to take into account inflation and foreign currency exchange fluctuations, as well as its obligations to its franchise area.

The ERC’s final determination reduced Meralco’s combined distribution, supply, and metering rates to P1.5828 per kwh for regulatory year 2012 (which will cover the period July 2011 to June 2012). 

According to the ERC ruling, Meralco’s rates will then remain stable for the remainder of the third regulatory period, which will be up to June 2015.

ERC’s final determination came after 11 months of regulatory scrutiny and public hearings.

The ERC approved a P37.2-billion capital expenditure program for Meralco for the third regulatory period, or from July 2011 to June 2015. 

“The ERC disagreed with a number of our project proposals and imposed more stringent performance standards for the company. Nonetheless, we remain unrelenting in our commitment to provide reliable and efficient electric service at affordable cost to our customers,” Dela Peña said.

Over the course of the second regulatory period, which covers July 2007 to June 2011, Meralco met or even surpassed performance indicators set by the regulators for various operations and service areas. 

For example, the frequency and duration of interruptions, as measured by the interruption frequency rate (IFR) and the planned cumulative interruption time, went down by about 50 percent during the second regulatory period.

System loss likewise significantly improved from 9.28 percent in 2008 to just 7.94 percent in 2010.

The average processing time for service applications, meanwhile, was shortened from 15.80 days to 5.46 days from 2008 to 2010.

According to the ERC ruling, the utility firm was directed to submit a rate translation proposal by June 13, which would convert the final determination rate into tariffs schedules for the various customer categories. 

This proposal will then be subjected to more public hearings by the commission.

The approved 6.36-centavo per kwh rate is a substantial reduction from prices Meralco applied for, which range from P1.7056 per kwh to P1.9036.

“We are beginning to see the objectives of the shift to performance-based regulation being realized, to put pressure on the utilities to improve their systems and be more efficient in their operations. We expect this to continue and bring more benefits to the consumers, in terms of better service and more affordable and reasonable rates,” ERC executive director Francis Saturnino Juan said.

Meralco earlier warned that a lower PBR may result to less capital spending for the company’s projects.

“Meralco wants to send the signal to investors that the company is committed to supporting them, lining up P45 billion in investments in its network and customer service infrastructure from 2012 to 2015,” Meralco COO Oscar Reyes earlier said.