Meralco denies being a major contributor to rising power costs

MANILA, Philippines – The Manila Electric Co. (Meralco) denied yesterday being a major contributor to rising power costs.

Reacting to President Arroyo’s statement at Tuesday’s Energy Summit, Jesus Francisco, Meralco president and COO, said it is not true that the power firm has the highest distribution charge.

“We do not think that to be the case,” he said.

Francisco said the combined Meralco charges (distribution, supply, metering) for December 2007 stood at only P0.93 per kilowatt-hour.

“In fact, for industrial customers, the Meralco charges averaged at only P0.33 per kWh,” he said.

Francisco urged the government, through the Energy Regulatory Commission (ERC), to set the record straight.

“In view of the concern raised by the President on this matter, we appeal to the ERC to publish the distribution and system loss charges of all distribution utilities and ecozones in the country for the benefit of all electricity consumers,” he said.

Francisco said Meralco backs government efforts to bring down power rates, especially among bulk users.

“We would like to express our willingness to work with the government on the acceleration of open access, within the guidelines that will be prescribed by ERC,” he said.

Francisco said as early as 2006, Meralco already expressed readiness to allow lower generation costs to be passed on to large customers.

“Since last year, Meralco, in collaboration with the National Power Corp., has been offering different rate options under the Customer Choice Program,” he said.

Meralco clarified that contrary to reports, it has not achieved a 16 percent rate of return.

For the period January to November 2007, its return on rate base – the measure of its profitability ­ was less than 10 percent, Meralco added.

Meralco said in terms of comparative return on assets (net income over utility assets), Meralco obtained a ratio of only four percent in 2006. 

In contrast, the state-owned National Transmission Corp. (TransCo), also a regulated utility, registered a return of 12 percent in the same year, Meralco added.

Francisco said that it is the ERC that determines the optimum sourcing mix, which is when its IPPs are dispatched at contract levels.

“All of Meralco’s IPPs are covered by long-term fuel supply contracts, protecting end-users from fluctuating fuel prices,” he said. 

“For example, Quezon Power buys coal at about half the price that is prevailing in the spot market.”

The wholesale electricity spot market (WESM) prices have been volatile but there are times when its customers may also benefit from this volatility, Francisco said.

In January 2008, when Meralco sourced nine percent of its requirements from the WESM, the average market clearing price, inclusive of the Napocor’s GRAM and ICERA, was only P3.38 per kWh.

On transmission charges, Meralco said it still has to recover about P5 billion in payments it advanced to TransCo on behalf of the consumers over the period June 2003 to present. 

This is the subject of a pending petition it has filed at the ERC.

Meralco said it bills its customers the ERC-approved transmission charges.