Provisional rate increase not for use of Meralco's refund obligations - ERC

The Energy Regulatory Commission (ERC) clarified that the provisional authority (PA) recently granted to Meralco for the increase of its rates is not intended to provide the said electric distribution utility with cash to refund the income tax it collected from its customers.

The clarification was issued by ERC in reaction to the press statement made by Meralco president Jesus Francisco stating that the grant of the provisional increase in its rate beginning January 2004 is timely because it will provide their company funds to meet its refund obligations.

“The provisional increase averaging twelve (12) centavos was given to Meralco to ease its financial difficulties in funding its capital intensive expansion programs to ensure continuous supply of safe, reliable and quality electric service,” ERC chairman Manuel R. Sanchez stressed.

“The on-going refund process of Meralco has nothing to do with our decision to temporarily grant the rate increase,” Sanchez added.

On October 10, 2003, Meralco filed an application with the Commission for approval of its proposed rate schedules and correlatively, the appraisal of its properties. Meralco is applying for an average rate adjustment of 13.58 centavos.

In granting the provisional rate hike, ERC took cognizance of the distribution utility’s 42 electric capital projects deferred due to lack of funds. The Commission is convinced that deferring these projects further would impair Meralco’s ability to continue providing safe, reliable and adequate service to its customers.

“The Commission is not inclined to put the consumers’ welfare at risk. We decided to grant this temporary relief to Meralco to spare its customers from the inconvenience of power interruptions resulting from the lack of necessary infrastructures,” the ERC chief said.

Meralco’s poor credit rating, as reflected in the reports of Standard and Poors Ratings Services, an independent international credit ratng agency, resulted in its difficulty to secure new loans and renew existing debts. This makes it more difficult for the said utility to maintain its operating efficiency.

“We also recognize our mandate to balance the interest of the consumer with that of the utility providing the electric service. We have to allow Meralco to realize a fair return on its investment within the 12% limit provided by law,” the chief regulator expressed.

Chairman Sanchez was quick to point out that the rate hike is provisional. The rate case is still subject to public hearings before the Commission can make its final decision. The rate adjustment is subject to refund in the event that ERC finds, after completion of hearings, that the same is unjust and unreasonable.

The first public hearing has been set on December 22, 2003 at 9:00 a.m. This will be held at the ERC hearing room located at the 15th floor of the Pacific Center Bldg., San Miguel Avenue, Ortigas Center, Pasig City.

“We urge representatives of consumer groups and other interested parties to participate in the forthcoming public hearings to assist us in coming up with a fair and equitable decision,” Sanchez appealed.

December 5, 2003