Aug. 4--Manila Electric Co. (Meralco) said its profit grew nearly a fifth in the first six months of the year mainly due to a new rate-setting scheme.

In a statement to the Philippine Stock Exchange, the country's largest electricity distributor reported a 19.20-percent increase in its net income to P3.16 billion from P2.65 billion last year.

Meralco's franchise area covers 4.63 million customers in Metro Manila and outlying provinces. It is jointly controlled by the Lopez Group, Philippine Long Distance Telephone Co. and San Miguel Corp.

The company attributed the increase in its earnings to the implementation of its Performance-Based Regulation (PBR), a rate-setting scheme prescribed by the Energy Regulatory Commission (ERC).

Under the PBR, a utility's rates are determined by the quality of its service to its customers. The scheme also grants a utility a regular adjustment on its tariffs in consideration of inflation and foreign currency exchange fluctuations.

The approval of Meralco's PBR in April resulted in an increase of P0.26 per kilowatt-hour in its "distribution, supply and metering" charge, which now stands at P1.22 per kilowatt-hour.

The PBR jacked up Meralco's distribution revenues by 10.40 percent, the utility said.

However, the company's total revenues dipped by 1.47 percent to P94.50 billion in the first half from P95.90 billion in the same period last year. Its income tax payments likewise rose, increasing by 5.50 percent to P1.36 billion from P1.29 billion previously.

Despite this, Meralco managed to cut its cost and expenses by 2.20 percent to P89.11 billion from P91.79 billion last year.

Manuel Lopez, Meralco chairman, said the company is "upbeat about a possible sales uptrend."

It would be recalled that at the beginning of the year, company officials painted a dour picture of Meralco's finances because of the three-year delay in the implementation of its PBR. Adding to this gloomy outlook was the global financial crisis.

But with the approval of its new rate-setting scheme, official said Meralco's profits would jump from P3.14 billion in 2008 to somewhere between P13 and P15 billion at the end of this year.

The utility earlier applied before the ERC for an adjustment in its tariffs to recover transmission charges of about P0.03 per kilowatt-hour starting this month's billing period.

This translates to roughly P2.59 billion, including interest over a three-year period, or less than a fifth of Meralco's anticipated profit for this year.

The country's largest electricity distribution utility originally sought P5.55 billion in transmission charges. The company, however, incurred over-recoveries as well, which allowed it to offset a substantial portion of the amount it originally sought to recover to only P2.59 billion.

The amount due represents its bill starting June 2003 until July 2007 from the National Transmission Corp.

-----

To see more of The Manila Times, or to subscribe to the newspaper, go to http://www.manilatimes.net.

Copyright (c) 2009, The Manila Times, Philippines

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

OTC-PINK:MERAY, Philippines:PSE, NYSE:PHI, Philippines:SMCB,

A service of YellowBrix, Inc.