Meralco rate reset resolution sought

Customers of the Manila Electric Co. (Meralco) should maximize the promised benefits under the Performance-Based Regulation (PBR) framework.

Thus, think tank Infrawatch PH urges the Energy Regulatory Commission (ERC) to expedite the resolution of Meralco’s long-delayed tariff review.

In a recent letter, Infrawatch PH Convenor Terry Ridon called on the ERC to finalize its decision on Meralco’s 5th Regulatory Period (5RP), which has already lapsed, and move forward with the 6th Regulatory Period (6RP) to avoid further delays and ensure the effective implementation of PBR.

“This will not only ensure that the benefits promised under PBR are realized by customers but will also send the appropriate signals for investors to come in,” Ridon said over the weekend.

Infrawatch pointed out that ERC chairperson Monalisa Dimalanta herself had confirmed the 5RP for Meralco had concluded. As a result, Ridon argued, the ERC needs to issue a formal order to proceed to the 6RP, per the regulatory framework.

4-year sales projection

Ridon explained that the rate reset process for private distribution utilities like Meralco is governed by the PBR system. 

Under PBR, utilities must submit revenue projections for the next four years, accounting factors such as customer growth, performance standards set by the ERC, and other regulatory requirements.

The PBR guidelines state that the ERC must evaluate rate adjustment applications based on the Rules for Setting Distribution Wheeling Rates. These rules require the ERC to issue a final decision on rate adjustments before the start of each regulatory period. For MERALCO, the 5RP officially began in July 2022 — over two years ago.

“The rationale for this strict timeline is not difficult to understand. PBR is a forward-looking rate-setting methodology based on forecasts of revenue requirements, such as capital expenditures, operating costs, taxes, and other regulatory obligations,” Ridon said. 

“It would be illegal to apply the rules to a period that has already passed, as actual costs have already been incurred.”

Ridon further noted that failure to resolve the 5RP promptly would undermine both procedural and substantive due process for Meralco, other distribution utilities, and consumers alike.

“To hold otherwise would deprive the PDUs and their consumers of substantive and procedural due process,” Ridon added.

After initially deciding to forgo Meralco’s rate reset, Dimalanta recently said that the Commission had decided to revisit Meralco’s application. 

Dimalanta noted that modifications to the application are now being considered based on suggestions made during a recent Congressional inquiry.