ERC issues ruling on Meralco

By Lenie Lectura – November 18, 2024
from Business Mirror

Customers of the Manila Electric Co. (Meralco) would have to await awhile for a possible refund, estimated at P16 billion, after the Energy Regulatory Commission (ERC) released last Friday its “modified” ruling on the fifth regulatory reset of the distribution utility.

“I am very happy that the commission unanimously this time modified our earlier split decision in August regarding the Meralco reset. It has always been my position that EPIRA requires the Commission to conduct a proper rate review, and this October 30 decision allows us to fulfill this mandate. The timelines are very aggressive, but with everyone’s cooperation, I believe this can be achieved,” said ERC Chairperson Monalisa Dimalanta in a Viber message on Sunday.

Under the Electric Power Industry Reform Act of 2001, the ERC is mandated to establish and enforce a methodology for setting transmission and distribution wheeling rates for a distribution utility. In this case, Meralco is subject to a performance-based regulation wherein it is required to undergo a rate reset prior to the start of the next regulatory year. In a nutshell, the ERC’s 21-page decision granted Meralco’s motion to withdraw the fifth regulatory period (5RP) application, covering  July 2022-June 2026, and ordered Meralco to refile its 5RP application to cover a different period, 2025 to 2028.

“After careful review of the arguments submitted by all parties, and taking into account the developments in the four year regulatory period as filed covering years 2022 to 2026, including the regulatory years that have already lapsed as of date, the commission considered the most reasonable and achievable le procedure within the new regulatory rate reset will be completed,” the order, which was promulgated last October 30 and publicly released late Friday, read.

The rate-rest process, according to Dimalanta, is usually a forward-looking exercise that requires Meralco to submit forecast spending and proposed projects over a five-year period. The ERC will review and adjust distribution rates accordingly since this will be the basis of the distribution rate that Meralco will pass on to its consumers.

Meralco’s last rate reset process, or 4RP, covered the July 1, 2015 to June 30, 2022 period. The 4RP resulted in a refund of at least P40 billion or around P0.73 per kilowatt hour (kWh).

The split decision that Dimalanta referred to was when ERC ruled to “forego” Meralco’s 5RP. Simply put, this meant that Meralco’s 5RP is already considered lapsed. This ruling was done prior to Dimalanta’s suspension and was not made public at the time.

According to Meralco Senior Vice president and Head of Regulatory Management Jose Ronald Valles, this decision was supposed to result in the refund of P16 billion to its customers.

“In our initial estimate for at least three years, that would be around P16 billion. So that’s a big, big, big relief for consumers. That’s why we want to have that closure already.”

When Dimalanta reported for work, she said the commission, which was then led by Officer-in-Charge Jesse Hermogenes T. Andres, issued a modified decision, which was also not publicly released.

Two weeks after Dimalanta’s reinstatement, the ERC has finally released the much-awaited decision on Meralco’s rate reset. “The motion for partial reconsideration, dated May 27, 2024, filed by Meralco is hereby granted with modifications: the Commission’s order dated April 16, 2024 is hereby partially reconsidered; the motion to withdraw the 5RP is hereby granted; Meralco shall file its 5RP application in accordance with the rules to be adopted by the Commission,” the order read.

Further, the ERC will initiate a rule making process, which will be subject to public consultation, to amend the commissions’ Rules for Setting the Distribution Wheeling Rates (RDWR). These amendments include “the regulatory years for 5RP of Meralco shall be modified to cover the regulatory years 2025 to 2028; and all other provisions of the RDWR to enable the commission to achieve a fair and just resolution of the 5RP as modified.”

Dimalanta described the latest ERC ruling as “twins.”

“The order itself plus the notice of rules amendment which requires public consultation,” she said via Viber.

When sought for Meralco’s comment on the latest ERC order, Valles confirmed that Meralco has received a copy of the latest order.

“The order says it is subject to public consultation and final deliberation of the Commission. So nothing is final yet. We will study the draft rules very carefully and submit our comments thereon as soon as the draft is released,” he said via Viber on Sunday.