Meralco may take P9.5-B hit if ERC turns down its request

MANILA, Philippines - Manila Electric Co. (Meralco), the country’s biggest power distributor, may take a temporary hit of P9.5 billion if the Energy Regulatory Commission (ERC) thumbs down its request to defer payments to power generators in the high-cost supply months of November and December, its top finance officer said.

On Dec. 23, Meralco asked the power regulator to direct Philippine Electricity Market Corp. (PEMC), the operator of the Wholesale Electricity Spot Market (WESM), to defer collections for Meralco’s November 2013 supply covered by the December 2013 billing statement and December 2013 supply, which is covered by the January 2014 billing statement.

WESM is the country’s trading floor for electricity.

The ERC earlier ordered Meralco to stagger its collections for both the December 2013 billing month and also stopped it from further hiking its January 2014 generation charge beyond P7.37 per kilowatt-hour. Meralco said that should this be the case, it should also be allowed to defer payments to power suppliers at the WESM.

Meralco said there is a legal basis for this given following the ERC’s order to stagger Meralco’s payment collections from its customers for the November 2013 supply month (covered by the December 2013 billing statement) and ERC’s Dec. 20 order preventing Meralco from further increasing its January 2014 generation charge beyond the earlier estimate of P7.37 per kwh submitted by the power distributor.

“Should this be granted, the pass-through nature of generation charge is sustained and we do not anticipate any significant financial and operating effect on Meralco. Otherwise, we may be compelled to pay with a corresponding temporary cash flow implication of over P9.5 billion. Meralco remains entitled to recover and bill such increase and will in due course file for such recovery plus taxes and related carrying charge,” Meralco chief financial officer Betty Siy-Yap said.

On the Supreme Court order, Siy-Yap said it would have the effect of delaying the billing and collection of the generation charge billed by the generators and PEMC for the month of November 2013 supply month, which is reflected in the December 2013 billing.

On Dec. 23, the High Court issued a temporary restraining order (TRO) against Meralco’s record high increase in its December generation charge of P3.44 per kilowatt-hour.

“Considering the pass-through nature of the generation charge, Meralco is left with no option but to defer the payment of the related liabilities to the generation companies and PEMC,” Siy-Yap said.

Meralco’s generation charge for December rose to a record high of P3.44 per kWh as a result of the month-long maintenance shutdown of the Malampaya gas-to-power project, which supplies natural gas to three power plants in Luzon.

The three plants sourcing power from Malampaya are the 1,200-MW Ilijan combined cycle natural gas plant owned by Kepco Philippines Corp. and the 1000-MW Sta. Rita and 500-MW San Lorenzo natural gas facilities owned by First Gen Corp. of the Lopez Group.

These three plants had to use the more expensive liquid fuel as a result of the shutdown. Unplanned outages by several other power plants also tightened supply, jacking up prices at the WESM, where Meralco also sources its power requirements.