ERC approves Meralco rate hike

MANILA, Philippines - Expect higher electricity bills in the coming days as lead power distributor Manila Electric Co. has been allowed higher distribution and metering charges beginning next month.

Meralco said the Energy Regulatory Commission (ERC) has approved its petition for a maximum average price (MAP) of P1.6303 per kilowatt-hour (kwh) for distribution, supply and metering charges to different customer classes.

This developed as the National Power Corp. (Napocor), through its unit Power Sector Assets and Liabilities Management Corp. (PSALM), is seeking as much as 10.59 centavos per kwh rate increase.

“These will be reflected in the bills of Meralco customers starting July,” Meralco said. The rates will be in effect until June 30, 2013.

Approved MAPs for 2011 and 2012 were P1.6464 per kwh and P1.6012 per kwh, respectively. Meralco’s original petition was for MAP of P1.6333 per kwh. In the petition, a household with an average monthly consumption of 200 kwh should expect a 16.4-percent increase in MAP from P1.0278 per kwh to P1.1962 per kwh.

Households consuming 201-300 kwh per month should expect a 12-percent increase to P1.5535 per kwh from P1.3851 per kwh while those with an average consumption of 301-400 kWh will bear a 9.8-percent increase to P1.8907 per kwh from P1.7223 per kwh.

Meralco earlier said the higher MAP under the Performance Based Rate (PBR) mechanism would reflect the company’s performance incentive and that it would carry cost for under-recoveries for 2011.

The ERC conducts an annual review of the rates of all private distribution utilities, taking into consideration the power distributors’ performance against mandated technical and customer service standards.

The PBR, an internationally accepted rate-setting methodology, aims to give consumers a higher level of service while allowing distribution utilities to achieve a reasonable return and ensure efficient service and system upgrades.

In the first quarter, Meralco added 40,000 new customers, bringing the total to a record 5.07 million as of end-March.

Meralco, which is indirectly controlled by Hong Kong-based First Pacific Co. Ltd. and partly owned by San Miguel Corp., posted a core net income growth of five percent to P3.42 billion in the first quarter.

Its target core profit for this year – or excluding non-recurring item – is P15 billion from P14.9 billion last year.

Rate hike petition

Meanwhile, state-run PSALM has applied for a 10.59-centavo per kwh rate increase for Luzon, and 11.57-centavo for Visayas. At the same time, it is seeking 2.58-centavo per kwh price cut for the Mindanao grid.

The ERC said PSALM has filed an application of its “true up adjustments of fuel and purchased power costs and foreign exchange-related costs.”

“(PSALM) seeks the ERC’s approval for the recovery and refund of the above-stated total true-up adjustments for the billing period March 2010 to February 2011,” ERC said.

A higher rate would enable PSALM “to improve its financial standing,” and “to efficiently comply with its mandate under the Electric Power Industry Reform Act (EPIRA) to liquidate all Napocor’s financial obligations and stranded contract costs in an optimal manner.”

Currently, effective rates of Napocor are P5.704 per kwh for Luzon, P4.5827 per kwh for Visayas and P2.9744 for Mindanao.

ERC said PSALM wants to recover a total of P2.814 billion of costs from consumers in Luzon and P2.2 billion from the Visayas. But the state-owned firm plans to implement a refund of P858.196 million to customers in the Mindanao grid.

The “true-up” adjustments will be implemented for five years for Luzon, Visayas and Mindanao, PSALM said.

The ERC has scheduled a public hearing on the petition on July 19 for stakeholders in Luzon, July 26 for Visayas and July 31 for Mindanao. PSALM was created under the 2001 EPIRA law to privatize government power assets as well as manage power plants and debts of Napocor. It buys the fuel requirements of state-owned power plants.

After the privatization of its power facilities, Napocor’s function would be limited to power generation in off-grid areas utilizing power plants not sold by PSALM.