Meralco anticipates ‘uncertainty’ in next reset of tariff setting

By Myrna M. Velasco – May 31, 2019, 10:00 PM
from Manila Bulletin

Absent yet a clear-cut regulatory methodology, power utility giant Manila Electric Company (Meralco) is anticipating that it will be confronted with “uncertainties” in the fifth reset of its electricity rate setting.

Newly installed Meralco President Ray C. Espinosa noted that the forthcoming business headwinds will be on the regulatory aspect of their tariff updating – as the company’s fourth regulatory reset will end this June.

“The challenge really is in the tariff setting, so that is a work in progress. We have been working very closely with regulatory finance, operations and business as to what we will need as reasonable tariff for the 5th regulatory period,” he expounded.

The distribution charge component being passed on by Meralco to its customers is often computed over a five-year rolling period, with a prescription for annual updating.

Ray C. Espinosa
(Photo source: from https://www.meralco.com.ph)

Since the deregulated power sector’s entry into performance-based rate-setting (PBR) methodology more than a decade ago, Meralco’s rates had already gone through four reset processes; and will soon be entering its fifth reset phase.

However, it faces a dilemma on its next tariff setting because the Energy Regulatory Commission (ERC) has not fully laid down yet the rules and parameters on the forthcoming computation of the utility firm’s charges.

Given that stalemate in the regulatory regime, Meralco is anticipating that this will eventually have impact both on its top (revenues) and bottom lines (income).

“I think the issue for us really will be the regulatory headwinds, as you know the fourth regulatory period ends by June 30 this year; and July 1 is the start of the 5th regulatory period,” Espinosa qualified.

Until now, the power firm is waiting for cue from the regulatory body as to how it will approach its next application for rate-setting starting this 2019.

ERC Director and Spokesperson Floresinda B. Digal admitted that the agency has not concretized the tariff setting metrics yet for regulated entities in the liberalized electricity sector, albeit she qualified that is on their “priority”.

Until the time that the ERC enforces the new PBR rules, Meralco may not be able to adjust its tariffs, hence, that is seen as a form of “unpredictability” on its revenue stream.