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Manila Bulletin devider Business devider ERC sets hearings on Meralco distribution charge hike

ERC sets hearings on Meralco distribution charge hike

Published Apr 10, 2022 08:00 pm

The Energy Regulatory Commission (ERC) is scheduling two days of public hearings on April 26 and 28 for the applied increase in the distribution charge of power utility giant Manila Electric Company (Meralco), and that is a key component of the overall tariff it has been passing on in the consumers’ electric bills.

The planned upward adjustment in the distribution charge of Meralco will start by regulatory year 2023. It will increase the rate by P0.1843 per kilowatt hour (kWh) to P1.5653 per kWh from the prevailing charge of P1.3810 per kWh.

The distribution charge is the rate component that goes directly into the coffers of Meralco as a constant charge in the bill within the prescribed regulatory year.

The rate adjustments of Meralco in the next four years will account for its fifth regulatory reset under the performance-based rate setting (PBR) methodology for regulated entities in the restructured electricity sector.

There had been delays in instituting the framework for the next PBR-based rate adjustments, such that the distribution charge of the company had been stagnant since 2015. It is only this year that the ERC reopened the application process for rate adjustments of the power utilities.

From the applied adjustment for 2023, the calculated distribution charges of Meralco based on the PBR methodology will also be higher at P1.5702 per kWh in 2024 before going down to P1.5695 per kWh in 2025, and P1.5564 per kWh in 2026.

The resulting cost swings in its distribution charge is based on the computed maximum average price (MAP), an outcome of ERC’s prescribed building blocks under the PBR and being factored in operating and maintenance expenditures; taxes, levies and duties other than corporate tax; regulatory depreciation; return on capital, as well as those on allowance for under- or over-recoveries and efficiency carry-over.

As estimated, the targeted revenue requirements of the power utility company would P68.179 billion in 2023; P78.368 billion in 2024; P84.470 billion in 2025; and P89.430 billion in 2026.

“The ARR (annual revenue requirement) is based on a proposed rolled-forward value of the applicant’s regulatory asset base (RAB),” Meralco emphasized; and one of the major cost components factored in is its annual capital expenditures.

As calculated, the power firm’s rolled-forward RAB will be P191.967 billion in 2023; P227.613 billion in 2024; P253.991 billion in 2025; and P270.999 billion in 2026.

In the rate application, Meralco further stipulated that there will be forward increases in its peak demand annually – and such shall escalate from 8,311 megawatts in 2022 to 8,570MW in 2023. In the succeeding years, peak demand will reach 8,839MW in 2024; then 9,204MW in 2025; and 9,558MW in 2026.

Related Tags

#MERALCO #PBR #DISTRIBUTIONCHARGE #RATEHIKE #ERC
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