Meralco gets ERC nod to hike charges

Manila Electric Co., the country’s biggest power distributor, will increase its distribution, supply and metering charges by 3 centavos a kilowatt-hour to P1.6303 starting next month.

In a disclosure to the Philippine Stock Exchange, Meralco said it has obtained a provisional authority from the Energy Regulatory Commission to implement the new charges for regulatory year 2013, covering the period July 1, 2012 to June 30, 2013, under the performance-based regulation (PBR) scheme.

Although the new distribution, supply and metering charge is higher than the current P1.6012 a kWh, the approved amount was slightly lower than the P1.6333 that Meralco had initially sought.

The PBR is an internationally accepted mechanism that promotes the efficient operation of utility firms, enabling them to render high quality service to their customers. Meralco adopted this scheme in 2007 and has since built more facilities that further improved service delivery to its more than five million customers.

Under this scheme, regulated distribution utilities like Meralco are subjected to a rate cap that is adjusted annually, based on their proposed capital spending for a given year. Any delays in the implementation of the rate increases will result in under-recoveries and may still be recovered in the succeeding regulatory years.

Meralco earlier stressed the need for ERC to grant an approval for the imposition of the new distribution, supply and metering charges by July this year to “enable it to immediately implement in a timely manner its capital expenditure program and address its operating and maintenance requirements for the third regulatory period.”

For this year, Meralco earmarked P11.9 billion for its capital expenditure program, the bulk of which has been allocated for electric capital projects.

The approved capital expenditure budget, Meralco earlier explained, was geared to “support projects in areas with a large concentra  tion of core customers, give priority to the correction of normal deficiencies in the system, stretch the loading limits of the [power firm’s] facilities and initiate practical and cost-effective projects.”

About 75 percent or P8.9 billion of the planned P11.9 billion spending for the year will be used to fund electric capital projects related to the power distribution business while the rest will be used for non-electric capital projects.

Funding of capital expenditures will come substantially from internally generated cash flow and borrowings from local and foreign financial institutions, Meralco said.