Meralco to Collect P8.7B in Pass-Through Costs, Including System Loss

The Energy Regulatory Commission (ERC) has authorized Manila Electric Company (Meralco) to collect a net P8.709 billion in previously unrecovered pass-through costs, including P595.05 million related to system loss, over approximately three years. This decision is expected to increase electricity bills for consumers. The regulator approved the collection of P7.30 billion in generation costs, P615.93 million in transmission costs, P595.05 million in system loss costs, and P228.88 million in real property taxes. These four main underrecoveries will generally be collected over 36 months, beginning in the next billing cycle. For residential customers, the four main recurring adjustments will total approximately P0.0803 per kWh. This is equivalent to about P16.06 for a household consuming 200 kWh per month. The actual bill impact may vary slightly depending on the customer’s location and other separate adjustments like lifeline, senior-citizen, and local franchise tax adjustments. The P8.709-billion figure is a net amount, after larger underrecoveries were offset by small refunds for lifeline and senior-citizen subsidies and local franchise taxes. However, customers should not expect a single net refund entry. The ERC had previously ordered Meralco to refund P9.51 billion in excess distribution rate collections over six months. When comparing both orders, customers are left with an aggregate net refund of about P798 million. The refund for excess distribution charges will appear as a separate line item called “AWAT (Refund)/Collect,” while the additional collections for generation, transmission, and system loss will be reflected under their respective bill components. Real property tax and local franchise tax adjustments will appear as separate line items labeled “RPT Adj.” and “LFT Adj.” The two orders also run on different timelines, with the refund spread over six months and the collection over 36 months. Most of the collections would continue after the six-month refund period ends. Such reconciliations are part of the ERC’s regular true-up process and are not unique to Meralco. Distribution utilities periodically compare allowable pass-through costs with what they actually billed; differences can result in either refunds or additional collections. But this approval is particularly sensitive because part of the collection covers system loss underrecoveries, even as Meralco faces renewed scrutiny over the charge. President Ferdinand Marcos Jr. has called for consumers to stop shouldering system loss and the value-added tax imposed on it. System loss refers to electricity lost while passing through wires, transformers, and other equipment, as well as losses caused by power theft, illegal connections, defective meters, and billing errors. The charge currently accounts for around 5% of the average Meralco bill. (READ: EXPLAINER: What is system loss, and how does it affect your power bill?) Meralco chairman Manuel V. Pangilinan has warned that the power industry “may not survive” if utilities are required to absorb the entire cost, which he said could reach tens of billions of pesos. The ERC’s decision highlights the ongoing challenge of balancing the need for power utilities to recover costs with the affordability of electricity for consumers. Source: Rappler.com