Meralco to implement rate reduction, hike

The Energy Regulatory Commission (ERC) has ordered the Manila Electric Co. (Meralco) to reduce its generation rate by 16.14 centavos per kilowatt-hour (kWh) starting next month.

At the same time, however, it also allowed the Lopez-controlled power utility to charge an additional 16.62 centavos per kWh to cover the reimbursement of P8.8 billion in generation costs.

Since the two adjustments almost cancel out, Meralco’s generation charge will hardly be felt by its customers, said ERC chairman Rodolfo Albano Jr.

“Combining these two adjustments approved in the order, the net impact for Meralco’s consumers would be an increase of 0.48 centavo per kWh only,” he said.

The ERC directed Meralco to cut its generation charge by 16.14 centavos per kWh to return to customers the net settlement surplus (NSS) from the Philippine Electricity Market Corp. (PEMC), operator of the wholesale electricity spot market (WESM).

Under the WESM rules, the NSS is the settlement surplus remaining after all market transactions have been accounted for.

Meralco vice president for corporate communication Elpi Cuna said with the NSS refund, their customers “will barely feel the impact of the generation cost under-recovery collection.”

“The overall effect will be almost inconsequential since it is even less than half-a-centavo increase,” he said.

Meanwhile, the P8.8 billion being reimbursed to Meralco through a 16.62-centavo per kWh rate increase is part of the generation costs from August 2006 to May 2007 that had not been billed to customers due to the suspension of the automatic generation rate adjustment (AGRA) mechanism.

“This decision to have us finally collect the amount we have advanced to our suppliers will provide much needed relief to our cash position. The fact remains that generation charges are merely pass-through items that distribution utilities, like Meralco, do not earn from,” Cuna said.

“All these adjustments are revenue neutral to Meralco as they only pertain to the payments we have made to our suppliers. In fact, we already advanced these payments on behalf of our customers. We just would like to emphasize, too, that we are constantly seeking ways to mitigate price shocks, such as these adjustments, and yield the most reasonable rates for our customers,” he added.

“With this relief, Meralco’s viability to remain in business to provide reliable service is assured and the possibility of imposition of additional carrying charges to cover its financing costs is minimized. These ultimately benefit the consumers,” Albano added.