No hike in power distribution rates as ERC sets hearings

MANILA, Philippines - Even as increases are expected in power generation charges, no raise in distribution charges will be implemented this summer, as the Energy Regulatory Commission (ERC) exhausts all modes of review. Luzon’s Manila Electric Co. (Meralco) and two other power retailers have pending rates applications at the ERC for the regulatory period July 2007-June 2008. Meralco wants to raise its service rates by P0.08 per kilowatt-hour (kWh); Cagayan Electric Power and Light Company, Inc. (Cepalco), by P0.02/kWh and Dagupan Electric Corp. (Decorp), by P0.10/kWh. Distribution charges on the average account for 16% of Philippine power bills. In a statement, the ERC said the firms’ applications filed early this month will still undergo due process and be subject to public hearings before decisions are made. "The application filed by Meralco will not impact yet on the existing electricity rates in the next two months or longer as hearings and comprehensive evaluation are still to be undertaken prior to ERC’s issuance of provisional approval, if warranted," said ERC Chairman and CEO Rodolfo B. Albano, Jr. The firms’ applications are based on the parameters of the performance-based rate (PBR) methodology approved by the ERC in August last year. As part of the PBR covering the years 2008 until 2011, the ERC recommended a rising trend in distribution rates, which the distribution utilities are required to convert into detailed tariffs in separate applications. These are expected to cover inflation-adjusted costs of supply, metering, other retail services. For 2008, Meralco can charge up to P1.167 per kilowatt-hour (kWh), up by 8% from last year’s P1.08/kWh, which was the maximum rate allowed for 2007. Citing delays in the approval of this year’s rates, however, Meralco is already seeking to double next year’s 10-centavo adjustment to cover underrecoveries. "The implementation has been delayed for reasons outside of the reasonable control of Meralco," the firm said in its most recent application for a 19-centavo increase to P1.36/kWh between 2008 and 2009. The ERC approved only a maximum increase of P0.10/kWh to P1.26/kWh for the same period. The charge can rise to P1.36/kWh for 2010, and P1.47/kWh for 2011, according to the PBR. In their separate PBRs, Cepalco can charge up to P1.163 per kWh this year. The charge can rise to P1.15/kWh for 2009, P1.22/kWh for 2010, and P1.29/kWh for 2011. Decorp can charge up to P1.245 per kWh this year. The charge can rise to P1.35/kWh for 2009, P1.47/kWh for 2010, and P1.60/kWh for 2011. "The proposed new [distribution] rates will not be implemented until and unless it is established that long-term consumer interests are protected and promoted," Mr. Albano said. Industry sources, however, brushed off the "minimal" impact of the distribution charges. "It’s nothing compared to the generation charge," said an industry official. Generation charges, or expenses due from power purchased by the DUs, make up 76% of power bills. It rises historically during the summer months when the demand is highest, and may hover at P5-6/kWh. In its report for March , the Wholesale Electricity Spot Market said high demand brought prices up to P6/kWh in the third week of March and P4.94.kWh during the last week. "For the first time this year, the peak demand during weekdays reached more than 6,000 MW brought about by the increased usage of cooling systems as the summer season progresses. The tight supply conditions resulted to increased spot prices," it said. - Maria Kristina C. Conti, BusinessWorld