Meralco expected to feel effects of lower power-distribution charge this year

by Lenie Lectura – February 26, 2016

from Business Mirror

THIS year the Manila Electric Co. (Meralco) will feel the full impact of a lower electricity-distribution charge imposed by the regulators in July 2015, its Chairman Manuel V. Pangilinan said on Friday.

Last year the Energy Regulation Commission (ERC) ordered Meralco to implement a lower distribution rate of P1.39 per kilowatt hour (kWh).

The regulator issued a provisional authority to Meralco to implement the following rates: P1.0114 per kWh for distribution charge; P0.2251 per kWh in supply charge; and P0.1444 per kWh in metering charge. In all, there will be an adjustment of P1.381 per kWh in the July bills of Meralco customers.

The rates are 11.26 percent, or P0.1752/kWh, lower than Meralco’s average rate of P1.5562/kWh.

In terms of core profit, Meralco expects “to remain in a regime of a slightly lower interim distribution tariff for most or all of 2016,” Pangilinan said. As such, “we expect Meralco’s core earnings for the year to be broadly similar to 2015 core income.”

Meralco reported on Friday a core income of P18.9 billion for 2015, 4 percent higher compared with P18.1 billion in 2014. Its reported net income grew by 6 percent to P19.1 billion last year.

Revenues were down by 3 percent during the 12-month period from P266.33 billion to P258.4 billion. Of the total revenues, P249.8 billion in electric revenues was registered. This was 5 percent, or P12 billion, lower than in 2014. Helping off set this reduction was an 88-percent increase in nonelectric revenues to P8.6 billion.

Meralco CFO Betty Siy-Yap said the impact of a lower distribution tariff to the company’s revenue could be equivalent to P3.5 billion this year.

“For 2016 impact is P3.5 billion before tax,” Yap said in a text message when asked to clarify the figures she mentioned during a news conference earlier in the day.

Pangilinan is hopeful that “there will be compensating factors for the anticipated decline of revenues in the distribution side of the business.” These include strong energy sales, increase in the contribution of subsidiaries and continued operating efficiency.

He cited the utility firm’s continued strong energy sales in January and February this year. Billed volume sales were up 12 percent and for February it’s trending around 10 percent.

“I think the increase in volume experienced so far this year for January and February energy sales are pretty strong for the first two months,” Pangilinan said.

Last year’s energy sales grew by 5.6 percent to 37,124 gigawatt hours (GWh), beating company expectations. The increase in energy sales was driven by a much warmer temperature, better power-plant reliability, and positive economic conditions.

Meralco registered 5.8 million customers at end-2015.