DISTRIBUTION UTILITIES’ PASS-THROUGH CHARGES ARE LEGAL

May 15, 2008

“We want to assure our customers that pass-through charges are authorized by law,” was the statement of Mr. Elpi Cuna, Meralco Corporate Communications Director in reaction to the call of Malacanang Chief Legal Counsel Sergio Apostol for consumers to file charges against Meralco for recovering systems losses and company use through the system loss charge.

Mr. Cuna cited Section 2, Rule IX of the Rules and Regulations Implementing RA 7832 which states that distribution utilities may recover “the actual system loss but not to exceed the maximum recoverable rate of system loss in kwhs plus actual company use in kwhs but not to exceed 1% of the total kwhs purchased and generated”. According to RA 7832 the recoverable rate of system losses for private utilities like Meralco is 9.5% while for electric cooperatives it is 14%.

“It is unfortunate that the Chief Legal Counsel of Malacanang will issue such a statement without first undertaking any legal research. It could be that his memory just failed him,” continued Mr. Cuna. Mr. Apostol was part of the 9th Congress as representative of the 2nd District of Leyte when RA 7832 was enacted into law in 1994.

Reacting to the ad entitled “Meralco, Pinagpala Sa Lahat”, Mr. Cuna explained that the recovery of system loss and company use is standard rate-making practice authorized by regulatory bodies here and abroad, including ERC and its predecessors, the Energy Regulatory Board (ERB), the Board of Energy (BoE), the Board of Power and Waterworks (BoPW) and the Public Service Commission (PSC). “All electric consumers, whether served by private DUs or electric cooperatives should examine their monthly electric bills. The system loss charge is there. Why single out Meralco?”

Meralco continued that before the unbundling, the recovery of system loss and company use was embedded in the basic charges and the adjustment mechanisms. In the unbundling required by ERC following the EPIRA, it is now shown as a separate component in the unbundled bill of all distribution utilities.

On the subject of company use, Meralco clarified that the total kwhs used in its central office in Ortigas, its substations, operating centers, 30 business centers, and other facilities scattered over its entire service area of 9337 square kilometers totaled 77.4 million kwhs in 2007. At 0.27% of total kwhs purchased, this represents less than one-third of 1%, the maximum allowance set by the RA 7832 IRR. It emphasized that this does not include power used in spaces that are not included in its rate base.

“Businesses and even non-profit establishments consider electricity costs as part of operating expense. For DUs, since we sell energy in kwhs, we account for it in terms of the kwhs used in providing continuous service to our customers,” continued Mr. Cuna. “For our customers, of the average P8.05 per kwh they paid in 2007, only 2 centavos was for recovery of company use.”