Halt to loss provisioning will boost Meralco’s bottom line
Honey Madrilejos-Reyes
Reporter

MANILA Electric Co. (Meralco), the country’s largest power distribution utility, can post a turnaround in net profit this year if provisioning for probable losses would be halted.
       And that would only be possible if the Supreme Court were to rule in favor of its appeal and declare valid the 17-centavo per kilowatt hour (kWh) unbundled rate hike approved in 2003 by the Energy Regulatory Commission (ERC).
       “We might end in the black [this year] if the provisioning would be stopped. But until the case in SC is decided, we will continue to provide for the probable losses,” said Daniel Tagaza, Meralco executive vice president and chief financial officer, in a press briefing on Tuesday.
       The company reported a loss of P748 million in the first quarter.
       Meralco started providing for losses in 2004 amounting to P9.82 billion, followed by P5.90 billion in 2005. As of end-April 2006, provision for losses was placed at P1.9 billion.
       “Our provisioning for probable losses every month amounts to P500 million,” Tagaza said.
       However, while an appeal for review is pending before the Supreme Court, Meralco said it continues to collect the tariff increase and at the same time implement the provisioning, so as not to be caught flatfooted should the Court rule against the company.
       In July 2004, the Court of Appeals challenged the ERC decision on the Meralco unbundling rate. The former rendered a decision annulling and setting aside the ERC order and remanding the case to the ERC for further proceedings. It also ordered the ERC to direct the Commission on Audit (CA) to audit the books, records and accounts of Meralco. The following month, Meralco filed a motion for reconsideration on the CA decision but this was denied in January 2005. On March 11, 2005 Meralco filed with the SC a petition for review of the CA decision, which, until now, has yet to be resolved.
       Meanwhile, from January to April this year, Meralco vice president Ivanna de la Peña said energy sales in kWh grew 3.4 percent. 
       “We are seeing moderate growth for the full year,” she said.
       In terms of bringing down its systems loss, the company said its target is to reduce it to single-digit this year from a level of 10.58 percent in 2005. Systems loss refers to the electrical energy lost through line and equipment losses and pilferage.