ERC okays phaseout of power cross subsidy; reprieve for firms
Tuesday, October 12, 2004
By MYRNA M. VELASCO
The commercial and industrial customers of Manila Electric Company (Meralco) will finally get a reprieve from long-standing dent of expensive electricity rates, as the Energy Regulatory Commission (ERC) already rendered a ruling on the utility firm’s petition for the removal of inter-class subsidy lumped in its tariffs.
The first phase of the cross-subsidy removal which is due for implementation October this year will bring down power rates for these bracket of customers by P0.0357 to P0.2783 per kilowatt-hour.
While there was a rate cut to be imposed for industrial and commercial power rates, however, it was noted that rates for residential customers would be jacked up by P0.2852 per kwh; and rates for general service customers, primarily hospitals would be up by P0.4356 per kwh.
In a ruling handed down by the Commission last week, it stated that the phaseout of cross subsidies will be carried out in two phases beginning in October this year; when 40 percent of the subsidies will be removed and in October 2005 when the remaining 60 percent will be taken out.
The regulatory body noted that the P0.7130 per kwh inter-class cross subsidy that is currently enjoyed by residential customers is shouldered by commercial and industrial customers; but he noted that the phaseout of such is necessary being mandated under the Electric Power Industry Reform Act; as this is aligned among policy moves aimed at correcting prevailing distortions in the country’s electricity rates.
ERC chairman Rodolfo B. Albano explained that the presence of subsidy in the rates means that the residential customers are paying less than the electricity they are using while commercial and industrial customers are paying more for their power service than the actual cost to serve them.
The ERC ruling provided that the initial removal of the 40-percent cross subsidy effective this month will result in the reduction of rate to large non-industrial service commercial customers of P0.2783 per kwh; and extra large industrial service customers by P0.2522 per kwh.
Meanwhile, the rates for medium non-industrial service commercial customers will also be pared down by P0.2312 per kwh, small non-industrial services customers by P0.1266 per kwh, large industrial service customers by P0.1095 per kwh and medium industrial service customers by P0.0357 per kwh.
The electricity rates for small industrial customers, on the other hand, will trail an uptrend of R0.4062 per kwh, according to the ERC order.
"The removal will make commercial and industrial customers more competitive. Moreover, the EPIRA requires the removal of the rate relief," Albano noted.
Meanwhile, it was pointed out that the industries are expected to pass on the savings from lower electricity bill to residential customers in the form of lower product and service prices.
"Export-oriented industries will be able to expand capacities and generate more jobs in the process. Dollar inflows will also be increased and will contribute to a healthier economy," the ERC chief stressed.
Upon the removal of the remaining 60-percent cross-subsidy prescribed to be undertaken in October next year, this is seen to result in further reduction of P0.4175 per kwh for large non-industrial service commercial customers, P0.3784 per kwh for extra-large industrial service customers, P0.3468 per kwh for medium nonindustrial service commercial customers, P0.1899 per kwh for small non-industrial services customers, P0.1643 per kwh for large industrial service customers, and P0.0535 per kwh for medium industrial service customers.
At this juncture, the rate of residential and general service customers consuming more than 100 kwhs per month will climb further by R0.4278 per kwh while that of small industrial customers and government hospitals will adjust upward by P0.6093 per kwh and P0.6533 per kwh, respectively.
Pursuant to Sec. 73 of R.A. 9136 (EPIRA), cross subsidies shall be phasedout in a period not exceeding three years from the establishment by the ERC of a universal charge.
Cross subsidies exist within a grid, between grids and between classes of customers.
The lifeline subsidy, a subsidy being enjoyed by electricity users below the threshold set by ERC, however, is exempt from the phase out for a period of 10 years pursuant to Sec. 73 of the EPIRA.
This means that for Meralco customers, residential end-users consuming approximately 50 kwh, 51-70 kwh and 71-100 kwh will still be given 50-percent, 35-percent and 20percent discounts on generation, transmission, distribution, supply, metering and systems loss, respectively.
posted by philpower @ 9:59 AM,
