Meralco: ERC approval of DTI petition will wipe out Meralco capital


Posted at Jun 27 2008 11:53 PM | Updated as of Jun 28 2008 07:53 AM


Manila Electric Co. (Meralco) warned on Friday that should the Energy Regulatory Commission (ERC) rule in favor of a government petition, the country's largest power distributor will incur heavy losses.

The ERC is deliberating a petition filed by the Department of Trade and Industry (DTI).

The petition seeks to have Meralco to expand its lifeline rate coverage, stop charging system losses and refund to customers system losses they have been charged.

Meralco board director Christian Monsod said the company's estimates losses of as much as P46 billion and a cash refund backlog of P56 billion.

That, he warns, will wipe-out Meralco's equity capital.

"Kung gagawin ito talaga i-liquidate mo na ‘yong Meralco... Kasi mawa-wipe out ‘yong equity capital ng Meralco… At saka selective... Why should the petition apply only to Meralco?" said Monsod.

Meralco executives for their part pointed to several possible ways to give consumers relief from high electricity rates.

On the side of power generation Monsod said power would go down by as much as 57-centavos per kilowatthour if National Power Corporation (Napocor) sells power to Meralco at P4.11 per kilowatthour or the same rate charged to other distribution utilities in Luzon.

"If, in addition, the WESM [Wholesale Electricity Spot Market] price were reduced to P1.81/kwh, as NPC [Napocor] recently did..., it could mean a further reduction. Meralco, however, realizes that lowering the NPC price to P4.11/kwh may mean our buying more from NPC than our IPPs (independent power producers]. Meralco has already told the government that it is open to that. But we also have to discuss the banked gas problem that could arise from that," said Monsod.

On the transmission side, Monsod said a reduction in ancillary charges, estimated at over P547 million has not been passed-on to consumers yet.

Ancillary charges cover the costs to support the transmission of electricity.

"TransCo [National Transmission Corporation] has not included that P500 million charge in its billings to Meralco the past three months. If this reduction is permanent, it would mean a reduction of 20 centavos/kwh to the consumer, but part of this would be offset by the underrecoveries of transmission charges of Meralco, amounting to about P5.6 billion, now pending decision before ERC," said Monsod.

Meralco president Jesus Francisco, for his part said the power distributor is on-track to bring its system loss below the 9.5 percent cap by end-2008.

"We are covered by the nine and a half percent cap system loss, which is the same as for all private electric utilities. If your loss is over the cap, you have to absorb the cost of the system loss yourself. It's only up to the 9 and a half that is passed on to customers," said Francisco.

"For this year, 2008 we are optimistic we can go below 9.5%. What does that mean, the moment we go below, we do not absorb any loss. But we will be in a position to actually reduce the system loss charges. In 2008 it's going to be a humble target... We should be able to save P953 million, which we can pass onto consumers, added Francisco.

Consumer could also expect reductions in the coming months arising from savings from Napocor's generation costs.

The ERC ordered Napocor to cut its generation charge in Luzon by P0.7116 per kilowatthour this month.

That would translates to a P0.30 per kilowatthour reduction in Meralco rates next month. is the online news department of ABS-CBN Interactive Inc., a subsidiary of ABS-CBN Broadcasting Corp., part of the Lopez Group of Companies.