ERC allows Meralco to raise rates next October

Customers of the country’s largest power distributor, Manila Electric Co., could expect to see a slight increase in their electric bills starting next month. This is because the Energy Regulatory Commission (ERC) has allowed Meralco to recover P3.371 billion from its excess purchases from the wholesale electricity spot market (WESM) from August 2006 to May 2007. In a 23-page decision released Wednesday, the ERC said that Meralco shall collect from its customers P0.0314 per kilowatt hour (kWh) effective next October until the full P3.371 billion — which includes interest — is collected. On Sept. 18, 2008, Meralco asked the ERC to reconsider its June 4, 2008 decision that disallowed Meralco to recoup a portion of the P2.7 billion in generation costs it incurred. Meralco said that its purchases from the WESM comply with the Electric Power Industry Reform Act of 2001 (EPIRA). It likewise said that requiring the firm to limit its energy purchases from the WESM to exactly 10 percent of its total demand “would be impossible and would defeat objectives of the WESM." “The disallowed P2.7 billion representing part of Meralco’s generation cost for the WESM purchases in excess of the mandatory 10-percent requirement are pass-through charges and its disallowance would undermine its viability as a distribution utility," Meralco said. WESM acts as trading floor for buyers and sellers of electricity. The ERC said that after reviewing the legal arguments of Meralco, the ERC was convinced that there was merit in revisiting the legal basis supporting the adoption of the 10-percent cap policy. The regulator imposed the policy, citing Sec. 45 of the EPIRA – for the first five years upon establishment of the WESM “no DU [distribution utilities] shall source more than 90 percent of its total demand from bilateral power-supply contracts." The ERC said that aside from Sec. 23 of the EPIRA, there are other provisions in the same law, in its implementing rules and regulations, and the WESM rules that can help determine whether the DUs’ generation costs — relative to WESM purchases — shall be allowed full recovery. The obligations imposed on the DUs to source from the least cost supplier under Sec. 23 of the EPIRA should be taken in the light of another requirement on generation sourcing as provided in Sec. 45 (c) and rule governing the recovery of their generation costs under Sec. 67. The ERC said that since DUs are prohibited under Sec. 45 (c) from contracting more than 90 percent of their total demand from power suppliers, it follows that even if the cost of power that is not sourced from bilateral contracts are higher than the transition supply rate of National Power Corp. (Napocor), DUs committed no violation. “Assuming that this portion is taken entirely from the WESM at prices higher than those stipulated in the DUs bilateral supply contracts with generation companies or the TSC [transition supply contract] rate and since there is no violation of Sec. 23 committed for such WESM purchases, it should follow that the DUs should be allowed to recover the cost of these purchases," the ERC said. The ERC added that the WESM sourcing requirement is not premised on the condition that purchases at the spot market should only be at times when the prices are lower than the TSC rates of Napocor. The ERC asked Meralco to reflect the generation charge as a separate item in the consumers’ electricity bill using the phrase “previous month’s adjustment on generation cost." JE/VS, GMANews.TV