PSALM questions ERC ruling on double charging

29 Apr 2013

The Power Sector Assets and Liabilities Management (PSALM) Corporation will file a motion for reconsideration to the 04 March 2013 order of the Energy Regulatory Commission (ERC) on the transmission line loss double charging case filed by the Manila Electric Co. (Meralco). PSALM said that the methodology adopted by the ERC deviated from the 10 March 2010 ERC decision, which was final and executory.

"The ERC, in its new ruling, adopted the straight discount method that Meralco proposed by deducting outright the 2.98% from the National Power Corporation (NPC) time-of-use (TOU) rates. This method failed to consider the fact that the line loss component of the NPC-TOU rate is not analogous to the actual line loss imposed by the Philippine Electricity Market Corporation (PEMC), as they differ in terms of meter location," PSALM President and CEO Emmanuel R. Ledesma, Jr. pointed out.

PSALM asserted that the 10 March 2010 ruling of the ERC should be implemented as worded because the procedure that the ruling proposed is fair to all parties concerned.

"The ERC originally ordered PEMC to provide NPC/PSALM its segregated line rental amounts for the transition supply contract (TSC) quantities from the start of the Wholesale Electricity Spot Market (WESM) to compute the accurate amount of the refund. The line loss imposed by PEMC is bundled together with line congestion, which PEMC charges its customers as line rentals," Mr. Ledesma explained.

However, on 10 June 2010 in a motion for reconsideration, PEMC manifested that the segregation of line rental is not feasible. Thereafter, the ERC issued an order dated 07 March 2011 requiring PEMC to submit an alternative method of segregation. To date, PEMC has not submitted data on the segregation of its line rental trading amounts.

"Thus, 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. It is for this reason that the ERC adopted Meralco's straight deduction method," Mr. Ledesma said.

"The decision cannot be modified merely on the basis that one of the parties will be inconvenienced by its implementation. The 10 March 2010 decision is final and executory. Hence, any modification to this ruling is considered null and void," Mr. Ledesma pointed out.

In addition, Mr. Ledesma disclosed that deducting the 2.98% line loss from the NPC-TOU amount effectively reduces the basic generation charge revenue requirement of the grid because the line loss in the NPC-TOU rates vis-à-vis the line loss component of the line rental differs in terms of reference points.

"PSALM, as a government-owned and -controlled entity, can neither forego its revenues nor refund government funds merely on the basis of practicality and convenience of a party due to the delay of such party in submitting the required data necessary to implement the decision, particularly if the alleged double recovery was not due to PSALM's fault but the effect of simultaneous implementation of the NPC-TOU rates and the Price Determination Methodology (PDM) in the WESM, both of which are ERC-approved," Mr. Ledesma said.

"PSALM continues to be bound by the TSC and the PDM as both remain valid until today. PSALM cannot deviate from either until an effective segregation mechanism from PEMC is approved by the ERC," he added.

PSALM also noted that the first computation that Meralco submitted for line loss amounted to PhP9 billion based on 2.89% line loss, which was subsequently corrected to 2.98%. In the ERC's latest ruling, the share of successor generation companies in line loss was considered, thereby reducing the amount of line loss to be recovered from PSALM/NPC to PhP5.1 billion.

"As PSALM and NPC are not privy to the computations of Meralco and considering that the figures are not fixed, the credibility of the figures cannot be established despite the significant reduction from the original amount that Meralco submitted," Mr. Ledesma said.

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