Meralco eyes scheme to cut ecozone power rates

The country’s biggest power distributor Manila Electric Co. (Meralco) is studying the possibility of introducing a special mechanism that would reduce power rates in the economic zones.

The so-called system loss differentiation is one of several schemes the Lopez-controlled power utility is proposing to implement to help make the country’s electricity rates competitive with those of its neighboring countries.

“There is a technical group that is now studying it. They are looking at what measures to be used to quantify a system loss,” Meralco president Jesus Francisco said.

He said normally, the establishments inside the economic zones are more efficient given the rate of dispatch of 80 to 85 percent.

“Since most of the locators at the economic zones are directly connected to the system, they have minimal system loss,” he said.

Francisco said if the proposed scheme is approved by the Energy Regulatory Commission (ERC), locators with lower system losses will qualify for reduced power rates.

Meralco currently charges an average system loss rate on all its industrial customers.

But the Meralco official pointed out that they have yet to carefully study the proposal.

“We have yet to device something to quantify the system loss,” he said.

System losses are unrecoverable purchased power lost while being transferred to the intended market. Technical losses and pilferage are the main causes of system losses.

Distribution utilities such as Meralco are required to absorb as much as 9.5 percent of their system losses while costs incurred beyond such ceiling are passed on to customers.

In 2006, locators of Clark Special Economic Zone (CSEZ) were given a 50-percent discount on their transmission rates after the state-owned National Transmission Corp. (TransCo) and Clark Electric Distribution Corp. (CEDC) entered into a transmission service agreement.

CEDC is the power distribution arm of Clark Development Corp. (CDC).

The ERC has approved the MOA and the transmission service agreement between TransCo and CEDC which will reduce power costs for locators of CDC.

Based on the MOA, TransCo will provide a reduced power delivery service charge of 50 percent of the ERC rate of P242.58 per kilowatthour for a period of not more than five years.

With the discount, TransCo is projected to lose about P625 million for the five-year discount period from 2007 to 2011.

But the ERC said these losses would be recouped through the investments that could be generated from this MOA.

“This will encourage more investments in the Philippines. Without relief to various locators within CSEZ, their closure or relocation to other countries will be inevitable. Such scenario will have a significant and negative effect on the national economy through the loss of both foreign exchange revenues and employment,” ERC said.

Late last week, Meralco acquired from its subsidiary Meralco Industrial Engineering Services Corp. (Miescor) through dacion en pago (payment in kind) majority stake or 65 percent of CEDC.

CEDC, the sole electric distribution company in the Clark Special Economic Zone in Pampanga, is a joint venture between Angeles Electric Corp. and Miescor.

Meralco owns 97 percent of Miescor, a firm engaged in infrastructure, consulting, management, maintenance and development of large grade construction projects.

CEDC has been providing electrical services since 1997 and currently serves more than 1,000 customers, consisting of mostly large industrial companies at the economic zone.