Meralco seeking to recover P1-billion loss from cross-subsidies

BY MARIA KRISTINA C. CONTI, BusinessWorld Reporter ON TOP of an application to recover P5.076 billion from transmission charges, the Manila Electric Co. (Meralco) is asking regulatory approval to recover a shortfall of some P1.05 billion from interclass subsidy collections. Meralco proposes to charge all its customers an additional P0.053 per kilowatt-hour (kWh) over twelve months for the interclass subsidies. Last September, in its application to recoup losses from the delayed pass-through of transmission charges, Meralco said it will charge an additional P0.25 per kWh for the transmission charges. In its latest application filed at the Energy Regulatory Commission (ERC) on Nov. 9, Meralco said it incurred losses as it was phasing-out the interclass subsidies between 2003 and 2006. The interclass cross-subsidy, a separate component of the Meralco bill, underwrote power bills of residential and general service consumers, small industrial firms, government hospitals, and flat streetlights. It is shouldered by better-paying customers from the commercial and industrial sectors. Meralco recomputed its billings as it met the ERC’s November 2006 deadline — per the omnibus power law — to remove the subsidies. However, the calculations showed that the ERC-prescribed implementation of the directive "did not allow for revenue-neutral implementation," Meralco said. Between June 2003 and October 2006, "the subsidy collected from the subsidizing segment was not sufficient to cover the discount provided to the subsidized customers." Meralco said its losses between June 2003 and October 2004 amounted to P915.80 million; and between November 2004 and October 2005, P180.20 million. It however admitted that it had collected P47.47 million in excess between November 2005 and October 2006. Even if the subsidies were officially eliminated in November of that year, Meralco said it sustained "under-recoveries" of P5.14 million between November 2006 and September 2007, due to re-bills to residential and general service accounts. Total under-recoveries, which Meralco said caused "additional financial burden," amount to P1.054 billion. Meralco proposes to recover this in one year, together with a carrying charge equivalent to the 91-day Treasury bill rates plus 300 basis points, as adapted from its generation adjustment rates, for every month of delay. It also included adjustments for value-added tax. The ERC has set a Feb. 5 hearing on the application. Meanwhile, Consumer Oil Price Watch Chairman Raul T. Concepcion suggested at Tuesday’s Energy Summit to expand the customer base of the so-called lifeline subsidy. Meralco residential customers who consume a maximum of 100 kWh per month enjoy subsidies from other residential, commercial and industrial users. The consumer watchdog said increasing the lifeline rate subsidy threshold from 100 kWh to 150 kWh per month will benefit an additional 620,741 households. This will increase power bills of those who subsidize, by P8.19 per kWh, and raise P 736 million monthly. The ERC said it will study the proposal. Earlier, President Gloria Macapagal-Arroyo directed the ERC to likewise expand the lifeline subsidy scheme, but did not specify measures.