MANILA, Philippines--The Energy Regulatory Commission has allowed power distributor Manila Electric Co. to collect its underrecoveries, which would result in an increase of 1.71 centavos per kilowatt-hour in consumers? electricity bills.

Because of this, households consuming 200 kWh of electricity a month can expect their bills to increase by less than P4. This will be implemented within a four-year period, according to the ERC.

?The ERC meticulously pored through the various submissions of Meralco and determined that these underrecoveries, with the disallowances it ordered, are part of the just and reasonable costs that the law allows a utility to recover,? said ERC executive director Francis Saturnino Juan.

In its decision, ERC said the underrecoveries it had approved were incurred in Meralco?s implementation of its lifeline charges, which amounted to P856 million, and inter-class cross subsidy charges, which amounted to P1.048 billion.

Meralco had filed in February 2008 its petition to recoup its underrecoveries for lifeline charges, covering the period of June 2003 to December 2007.

Proceeds from this particular charge? which is imposed on Meralco?s non lifeline customers?are used to subsidize the discounts in the electricity rates granted to Meralco?s lifeline customers.

Under the current lifeline structure, those consuming 0-20 kwh are entitled to a 100-percent discount; 21-50 kWh, 50 percent; 51-70 kWh, a reduction of 35 percent; and those consuming 71-100 kWh, a discount of 20 percent.

The lifeline charge was fixed based on certain assumed kilowatt-hour consumption for the lifeline customers and kilowatt-hour sales to the non-life con sumers. On a monthly basis however, these kilowatt-hour consumption and sales vary from that used in the fixing of the lifeline charge.

When the amounts collected from the non-lifeline customers are not sufficient?either due to an increase in the kilowatt-hour consumption of the lifeline customers or a reduction in kilowatt-hour sales to the non lifeline customers or a combination of both?Meralco is constrained to shoulder the shortfall.

In such cases, Meralco incurs an underrecovery in its implementation of the lifeline charge.

Meanwhile, Meralco lodged its application to collect underrecoveries for its interclass cross subsidy charge last Nov. 14, 2009.

Prior to its eventual phase out and removal as mandated under the law, cross-subsidies existed and were allowed in the rate structures of the utilities.

Certain classes of the utility?s customers, such as the industrial and commercial end-users, are imposed an additional charge.