The Energy Regulatory Commission (ERC) has ordered power utility giant Manila Electric Company (Meralco) to refund P21.769 billion worth of overcollections accruing from its tariff adjustments covering the period from July 2015 to June 2022 which will translate to reduction of P0.87 per kilowatt hour (kWh) in the electric bills of residential consumers.
The 68-page ERC order, dated June 16, 2022 and received by Meralco on July 5, emphasized that the refund shall be reflected in the bills of Meralco customers in this July billing, hence, negating the anticipated increase in the rates this month.
According to ERC Chairperson Agnes T. Devanadera, the regulatory body reviewed the rate adjustments implemented by Meralco in its last regulatory reset; and it came out with the final computation of a refund from the over-recoveries incurred by the utility firm in the last seven years.
“We made adjustments on the regulatory asset base (RAB) and recomputed the interim average rate (IAR). We wanted to ensure that all over-recoveries shall be refunded complete with interest," she stressed.
This is already the fourth batch of pay-back that had been mandated by the ERC for Meralco to implement -- the three previous refunds had been: the P13.9 billion ordered in January 2021; the P4.8 billion supplemental refund decreed in February 2022; and the P7.7 billion that had been mandated in March this year.
For the new P21.8 billion pay-back to customers, the ERC has directed Meralco “to effect the refund in approximately 12 months or until the amount is fully refunded to its customers, and to reflect the refund rate as a separate line item in the bills of customers during the refund period.”
The cost reduction computed by the ERC had been at average of P0.4790 per kWh across customers; but for residential end-users, in particular, Meralco noted that this will redound to rate decline of P0.87 per kWh.
ERC justified that it “carefully evaluated” the refund case of Meralco relating to its true-up (cost) adjustments, and Devanadera sounded off “we are confident that our decision exercised fairness, and promoted the interests of the consuming public who bears the brunt of all these electricity charges.”
She added “let's not forget that the provision of electricity is a public service and providers should only earn just and reasonable return on their investments.”
In a statement to the media, Meralco Vice President Joe Zaldarriaga asserted that “we will comply with the ERC’s directive. We are currently studying the order so we can start reflecting this in the power bills this month.”
He qualified that “while we have yet to receive suppliers’ billings, there is a possibility that the refund can offset the expected increase in generation charge and lead to a reduction in the overall power rates for July.”
The tariff adjustment for Meralco had been anchored on performance-based ratesetting (PBR) methodology; and while cost recovery had been set on forward calculations, there is a review and evaluation process which allows the ERC to order refund for cost over-recoveries; or mandate additional collection from consumers on under-recoveries.