Expect lower power rates

Customers of Manila Electric Co., the country’s biggest power distributor, can expect the distribution, supply and metering component of their electricity bills to go down over the next four years, after the Energy Regulatory Commission (ERC) approved lower rates under the performance based regulation (PBR) scheme.

The ERC said the distribution, supply and metering charges will go down to P1.5828 per kilowatt-hour in 2012 and then to P1.5817 per kWh in 2015, from the current charges amounting to P1.6464 per kWh.

The new charges were approved under Meralco’s application for a rate hike for the third regulatory period covering July 2011 to June 2015.

“We are beginning to see the objective of the shift to performance-based regulation being realized, to put pressure on the utilities to improve their systems and be more efficient in their operations. We expect this to continue and bring more benefits to the consumers in terms of better service and more affordable and reasonable electricity rates,” said ERC Executive Director Francis Saturnino Juan.

These newly approved ERC charges are much lower than what Meralco sought in its application. It asked an increase in the distribution, supply and metering component ranging from P1.7056 per kWh to as high as P1.9036 per kWh. With these increases, Meralco said it intended to invest as much as P44 billion for the whole third regulatory period.

The approval of the lower charges meant that the ERC had disallowed certain projects in Meralco’s proposed capital expenditures, deeming these to be not fully justified. This resulted in a significant drop in the figures for the return on capital component of Meralco’s approved revenues.

The ERC also adopted a more stringent performance incentive scheme than what was proposed by Meralco, mandating that the utility strictly observe the approved performance indicators and giving it the appropriate incentives for it to improve its services.

The ERC decision paves the way for Meralco to apply to have the approved charges of P1.5828 per kWh for 2012 translated into rate schedules for its various customer classes.

Only the other day, Meralco announced that customers’ electricity bills would go up this month because of the rise in the generation charge by 51 centavos per kWh.