ERC directs MERALCO to Refund Net Over-Recoveries
The ERC on 12 October 2009 resolved three pending cases of the Manila Electric Company (MERALCO) pertaining to over- and under-recoveries in its transmission charges and implementation of its approved charges to recover certain under-recoveries in its purchased power adjustment (PPA), and taken together, the ERC's actions on these pending cases called for MERALCO to implement a refund of its net over-recoveries at the rate of PhP.0107/kWh.
The first of these 3 cases relates to MERALCO's claims for under-recoveries in its transmission charges for the period from June 2003 to July 2007 totaling PhP5.56 Billion, which it filed in September 2007 and was docketed as ERC Case No. 2007-147RC. After disallowing some of the amounts included in MERALCO's application based on its finding that these were not duly substantiated or explained, the ERC approved MERALCO's recovery of the amount of PhP5.35 Billion, inclusive of carrying charges, representing its under-recoveries for the period covered by the application.
To mitigate the impact of its Decision in ERC Case No. 2007-147RC, the ERC acted on MERALCO's plea for provisional authority in the subsequent application relating to its transmission charges that it filed in July 2009, which is for refund of its net over-recoveries in its transmission charges for the period from August 2007 to August 2009, totaling PhP4.5 Billion. In this subsequent application docketed as ERC Case No. 2009-054RC, the ERC granted provisional authority for MERALCO to effect a refund of the total amount of PhP5.17 Billion, which it intended to be implemented simultaneously with the Decision in ERC Case No. 2007-147RC. With this move, the net amount to be collected by MERALCO representing its transmission charge under-recoveries was reduced to PhP174 Million.
In the meantime, the ERC evaluated MERALCO's submissions on its implementation of its charges for collection of its PPA under-recoveries as approved under ERC Case No. 2001-383 and 2004-466. In its evaluation, it found that MERALCO realized a net over-recovery in its implementation of the approved PPA charges in the amount of PhP452 Million, with carrying charges.
Effectively, this offset the entire transmission under-recoveries of MERALCO in the amount of PhP174 Million, and even left a balance of PhP278 Million, which MERALCO should refund. Assuming the implementation of the refund to cover a period of one year, the ERC fixed the refund rate at PhP.0107/kWh.
The variance between MERALCO's transmission costs and the revenues it earns based on the transmission charges that it is authorized to implement, causes these over- or under-recoveries. This variance can be attributed to several factors, among them, in the case of MERALCO's under-recoveries under ERC Case No. 2007-147RC, the implementation of TRANSCO's new rates in November 2004, without yet a corresponding transmission rate adjustment mechanism (TRAM) for the distribution utilities (DUs) being adopted. Another reason is the difference in the period of computation of transmission rates by DUs to be charged to the consumers and the computation by the transmission provider of its Power Delivery Service Charge to the DUs. Under the TRAM, which eventually was put in place by the regulator to minimize these over- and under-recoveries, the DUs adjust their transmission rates to the consumers on an annual basis while the transmission provider's Power Delivery Service Charge varies on a monthly basis.
"While the reduction to the electricity bill may be minimal, the ERC's actions actually averted a rate increase that would have been inevitable had MERALCO been just allowed to recover what is due it, without the ERC putting it to task to immediately return to the consumers what is due them," ERC Executive Director and Spokesman Francis Saturnino C. Juan pointed out.
October 14, 2009