Meralco to raise power rates

The Manila Electric Co. will most likely increase its electricity rates following the Energy Regulatory Commission (ERC)’s recent order to lift the cease-and desist order (CDO) it issued last April stopping Meralco from collecting its deferred power adjustment claims.

In issuing the CDO last year, the ERC questioned Meralco’s automatic collection of its deferred purchased power adjustment (PPA) claims, which it said was a deviation from the formula approved by the ERC under ERB Case No. 2000-168.

The CDO allowed Meralco customers to enjoy a reduction of 38 to 40 centavos per kilowatt-hour (kwh) reduction in their PPA effective June 2002.

However, after a thorough evaluation, the ERC said that Meralco’s PPA computations were correct after all and lifted the CDO last Dec. 23.

This move will pave the way for Meralco’s recovery of its P9.2-billion total deferred PPA claims from January 2000 to September 2002.

In its five-page order, the ERC, however, authorized Meralco to collect only P7.3 billion of the total amount.

"Meralco claimed that it still has an under-recovered purchased power cost amounting to P9.2 billion as of September 2002. However, upon verification, the under-recovered purchased power cost amounted to only P7.3 billion," the ERC said.

While allowing to collect P7.3 billion, the ERC said Meralco has also to defer the collection of some P1.5 billion worth of transmission line fee that has been charged by Meralco under its deferred PPA.

This means that while waiting for verification of the ERC on the P1.5 billion, Meralco will only be allowed to collect from its customers P5.7 billion.

In lifting the CDO, the ERC, however did not specify if the 38 to 40 centavos power rate reduction enjoyed by Meralco customers in the last six months while the CDO was enforced, will be the same rate of increase that would be imposed by the power utility when it starts collecting its deferred PPA claims.

Based on the new ERC order, Meralco could start collecting its deferred PPA claims along with its requested P1.12 kWh unbundled generation rate, which is still pending with the ERC.

The ERC clarified that the discrepancy between the computation of Meralco and the commission was due mainly to issues related to pilferage recoveries.

"In computing the amount of pilferage recoveries to be included in its PPA computations, Meralco deducted the expenses it incurred in its anti-pilferage campaign," the ERC said.

The commission, however, believed that Meralco’s pilferage recoveries should be deducted in full from its PPA computations. The said policy is in accordance with Section 2, Rule X of the implementing rules and regulations of Republic Act No. 7832, otherwise known as the Anti-Pilferage Act of 1995.

The five-man ERC noted that pilferage cause actual system losses and the distribution utility is penalized when losses exceed the cap.

"When the distribution utility successfully recovers amounts pertaining to pilferage, it is likewise fair to give some credit in terms of kilowatt-hour sales," it explained.

"For this purpose, the commission included the Violation of Contract (VOC) sales in kWh calculated as the gross pilferage recovery during a month divided by the average effectively selling price per kWh," the ERC added.

But the commission said Meralco’s method of estimating pilfered energy may be appropriate for pursuing a particular VOC case.

"However, the amount of money actually recovered does not necessarily correspond to the amount of energy in Meralco’s estimate. The Commission believes it is the amount of money collected that should serve as the basis for VOC sales," ERC ruled.