Meralco gives assurance lowest electricity cost is its objective, too

MANILA, Philippines—Manila Electric Co. (Meralco) on Monday (Jan. 4) sought to assure consumers that it continues to comply with standards set by the government to deliver electricity at the lowest possible cost.

Meralco issued the statement after Bayan Muna Rep. Carlos Zarate questioned its compliance with the competitive selection process (CSP) set by the Department of Energy (DOE).

CSP requires power distributors to bid out their electricity supply to generating companies that offer the lowest rates.

“As a regulated entity, Meralco conducts its business in full compliance with all rules and regulations issued by the Energy Regulatory Commission (ERC) and DOE,” said Lawrence Fernandez, Meralco vice president and head of utility economics department, in a statement.

“In fact, as seen previously, the terms of reference were reviewed and approved by the DOE, and all contracts that will result from the bidding process are subjected to regulatory proceedings and evaluation by the ERC,” he said, referring to guidelines in selecting power suppliers.

Zarate earlier called for a ban on cross-ownership of distribution utilities and power generation, or a distributor also owning generating companies, “to stop the anti-consumer self-dealing transactions” between these companies. Zarate said this has to be done while the Electric Power Industry Reform Act (Epira) of 2001 has not been repealed yet.

Zarate made the statement after the ERC allowed Meralco to recover from consumers some P2.38 billion in generation charge that had not been collected. The ERC order followed another which ordered the power utility giant to refund consumers some P1.4 billion in rates believed to have been overcharged.

Zarate also assailed what he said was Meralco’s continued attempts to tailor-fit the terms of its power supply contracts to favor a subsidiary, Atimonan One Energy Inc.

The CSP, said Zarate, “is proving useless in stopping” the practice of Meralco of customizing its power supply bidding rules in favor of the generation company that it also owned.

Fernandez said Meralco “looks forward” to continue applying the current CSP to its future power supply contracts.

He said the CSP bidding in 2019 was a “successful endeavor” done in compliance with the DOE order requiring distributors to procure power through fair bidding.

The CSP, he said, was “administered” by a third party bids and awards committee that was formed in accordance with the DOE order. “The same process will be followed for succeeding rounds of CSP,” Fernandez said.

The CSP conducted by the third party committee, he said, “is technology agnostic.”

In 2019, he said, some 30 percent of the 500 megawatt of electricity that Meralco contracted was “from renewable energy.” At least 58 percent was from natural gas, he said.

“Meralco is committed to signing partnerships that can deliver competitive electricity for our customers, while also using a balanced mix of power supply” Fernandez added.

He said Meralco customers have experienced a net rate reduction of P1.3870 per kilowatt/hour, which is equivalent to a bill reduction of more than P277 for a household consuming 200 kwh since the start of 2020.

Fernandez said the ERC order allowing Meralco to recover charges that had not been collected was based on the utility’s application to confirm pass-through fees from 2017 to 2019.

He said according to ERC calculations, Meralco had failed to recover at least P935 million as the ERC granted interim relief in its order to refund overcharges in three months and collect unpaid charges in 24 months.

In its initial implementation, Fernandez said the ERC order “will mean a net average reduction of 11.5 centavos per kwh in the pass through charges of Meralco customers.”

“Upon receiving the ERC order, Meralco immediately began preparations to comply,” he said.

He said validating overcharges and uncollected fees was a regular process for all distribution utilities that would take time. Utilities, he added, were required to apply for recoveries at the ERC to make sure the pass-through costs are fair.

TSB