PSALM to validate Meralco's PhP10-billion claim

31 Oct 2012

The Power Sector Assets and Liabilities Management (PSALM) Corporation has not officially received the newly increased refund claim of the Manila Electric Co. (Meralco) from PhP9.1 billion to PhP10 billion so it will still have to validate the basis of Meralco's computation.

PSALM President and Chief Executive Officer Emmanuel R. Ledesma, Jr. clarifies that PSALM charges Meralco a time-of-use (TOU) rate approved by the Energy Regulatory Commission (ERC) pursuant to the transition supply contract (TSC) also approved by the ERC.

The Philippine Electricity Market Corporation (PEMC), on the other hand, charges line rentals using its ERC-approved Price Determination Mechanism (PDM) from the start of the Wholesale Electricity Spot Market (WESM) operations.

Meralco's proposed methodology fails to consider the fact that the line loss component of the National Power Corporation (NPC)-TOU rate is not analogous to the actual line loss imposed by PEMC. It must be noted that the line loss imposed by PEMC is bundled together with line congestion which PEMC charges its customers as "line rentals." However, no breakdown is available as to the allocation of the bundled rate between the two components to determine how much PEMC is really charging for the line loss.

Moreover, the reference points and quantities used as basis in computing the line loss component of the NPC-TOU rate and PEMC's actual line loss are not identical. More importantly, the proposed methodology is merely a straight application of 2.98% line loss and does not consider the actual fluctuating nature of the hourly line loss being charged by PEMC.

"Simply put, given that the two rates are not comparable at all points with each other, Meralco's methodology is inaccurate as it simply extracted the 2.98% line loss from NPC's TOU rate to serve as basis for the refund amount without considering the actual line loss," Ledesma said.

"The fact that the ERC, in its 10 March 2010 decision, ordered NPC to file a refund/collection scheme indicates that even the ERC contemplates instances wherein NPC/PSALM may even collect line loss. And it is also for this reason that PEMC was directed to provide NPC/PSALM the required segregated line rental amounts for TSC quantities including the actual line losses embedded in the line rental amounts from the start of the WESM operations up to the most current billing," he pointed out.

"PEMC has to extract from its line rental amount the corresponding line loss cost so that this amount can be cross-referred to the 2.98% line loss as claimed by Meralco," Ledesma added.

PSALM has proven that there may be instances wherein double charging is inexistent based on the sample data provided by PEMC and cleared by Meralco for 18 June 2011, a date randomly chosen by the ERC. During the ERC's 16 October 2012 hearing where PSALM presented the data, it was ascertained that it was impossible to calculate the amount that was supposed to be refunded by PSALM since the actual line rental on the sample date pertaining to Angat power plant's supply to Meralco registered a negative amount. A negative net line rental indicates that Meralco was not charged for any line loss.

"This clearly belies the reasonableness of Meralco's proposed methodology," Ledesma stressed. "It was also wrong for Meralco to conclusively provide an absolute amount of PhP9.1 billion which it has now unilaterally increased to PhP10 billion as it did not consider the actual fluctuating nature of the hourly line loss being charged by PEMC."

Nowhere in the decision did the ERC rule on a certain fixed amount to be refunded by PSALM nor did it conclusively rule on an outright refund. PSALM should not be faulted for not providing a number since the same may only be determined if the line loss component of the line rental is made available by PEMC. Without this data, it would be impossible to come up with a correct methodology reflective of the intricacies and technicalities of the two ERC-approved rates.

"PSALM hopes that the ERC will be circumspect in adopting a methodology that will be in keeping with the intent of the decision. As in any other case of refund, the purpose of a refund is merely to return to the other party the exact amount it has overpaid. It does not go beyond forcing a party to refund when such is not called for nor to refund an amount which is more than what the other party has overpaid," Ledesma concluded.

Strategic Communications and Partnership Division
Tel. No. (632) 9029067