ERC approves collection of P31B from Meralco to power generators

The Energy Regulatory Commission (ERC) has approved the collection of about P31 billion by Manila Electric Co. (Meralco) for remittance to power generation companies, a move that allows the distribution utility to recover costs linked to electricity supply obligations and settle amounts due to suppliers.

The regulator said the approval covers charges that Meralco will collect from customers and pass on to generation companies under the applicable pass-through mechanisms for supply costs. The decision is intended to address obligations incurred in prior periods and to align collections with amounts that were incurred or paid under existing supply arrangements, according to the ERC’s action on the request.

Basis of the approval and what the collection covers

The ERC’s approval centers on the principle that certain components of electricity bills—particularly generation-related charges procured under contracts and market transactions—are treated as pass-through items. Under this framework, distribution utilities collect these costs from end-users and remit them to generators, with the regulator reviewing whether the amounts were prudently incurred and properly documented.

In approving the P31 billion collection, the ERC cited the need to reconcile amounts associated with power supply costs and to ensure generators are paid for electricity delivered under Meralco’s supply portfolio. The regulator’s decision also reflects the continuing practice of spreading recoveries over a defined period to temper the immediate bill impact, subject to the conditions and timelines specified in the approval.

The collection is not positioned as a change in Meralco’s distribution charge, which is a separately regulated component. Instead, it relates to supply-side costs that are billed to customers and passed through, with the ERC setting parameters on how these can be recovered and the schedule by which collections and remittances are to be made.

Expected distribution to power generators

The approved amount is expected to be remitted to multiple power generation companies that supplied electricity to Meralco customers, reflecting the distribution utility’s mix of contracted and market-based supply. The ERC’s action allows Meralco to collect the funds and allocate remittances consistent with the underlying transactions and billing determinants reviewed by the regulator.

While the ERC decision authorizes a total collection figure, the actual distribution across suppliers follows the billing and settlement records tied to specific supply sources. These typically include generation companies with power supply agreements as well as entities that sold electricity through the wholesale electricity spot market when contracted supply was insufficient or when market conditions required additional purchases.

Industry analysts monitor such recoveries because they affect generator cash flows and may influence supplier behavior, including willingness to offer longer-term contracts versus reliance on spot market sales. For distribution utilities, the ability to recover and remit prudently incurred supply costs is a key part of maintaining credit standing and sustaining procurement arrangements.

Implications for electricity pricing and bill components

The ERC’s approval is expected to have a measurable impact on electricity bills because the collection is recovered from customers through bill components associated with generation and related pass-through charges. The magnitude and timing of the increase depend on how the regulator allowed the recovery to be spread out and how the approved amount translates into a per-kilowatt-hour effect over the collection period.

Power bills in the Meralco franchise area are made up of several components, including generation, transmission, distribution, system loss, and taxes and other charges. Pass-through items—particularly generation-related charges—tend to be among the most volatile because they move with fuel costs, contracted rates, and spot market prices. Regulatory approvals like this one can add to near-term bill pressures even if they are tied to prior-period obligations.

At the same time, the approval may reduce uncertainty around deferred costs that would otherwise remain unresolved between utilities and suppliers. By clarifying a collection and remittance path, the ERC’s decision could help normalize settlement flows in the sector, though customers may still face higher charges while the recovery is being collected.

Context for Meralco and the broader power market

Meralco is the country’s largest private distribution utility, serving millions of customers across Metro Manila and nearby provinces. Its generation charge reflects the cost of electricity it buys from independent power producers and other suppliers, supplemented by purchases from the spot market to meet demand requirements.

Regulatory scrutiny of pass-through collections is a recurring issue in the Philippine power sector, where utilities periodically seek approval to recover costs arising from supply contracts, market purchases, and other billing determinants. The ERC’s role is to balance consumer protection with the need to ensure that legitimate supply costs can be recovered and that market participants are paid in a timely manner.

The approval also comes amid ongoing policy attention on electricity affordability and supply stability. With demand growth and periodic supply tightness affecting spot prices, regulators and market participants have emphasized the importance of transparent cost recovery and procurement practices that reduce exposure to price spikes.

Key points from the ERC action

The ERC’s approval focuses on authorizing Meralco to collect and remit a consolidated amount to generators under regulated pass-through rules. The decision underscores that the collection is linked to power supply costs rather than the utility’s regulated distribution rate, and that it is subject to the conditions set by the regulator on implementation and reporting.

For stakeholders, the main implications include the timing of bill impacts, the settlement of amounts due to generation companies, and the signal the approval provides on how the ERC is handling reconciliations of supply-side costs. The action also reinforces the broader regulatory approach of requiring documentation and review before large recoveries are reflected in consumer bills.

• Consumers: potential upward pressure on bills during the approved recovery period
• Generators: improved visibility on remittances and settlement timelines for delivered power
• Meralco: regulatory clearance to collect and pass through approved supply costs
• Power market: clearer settlement of prior-period obligations that can affect contracting dynamics

Disclaimer: This report is for general information based on publicly available details of the ERC decision and related disclosures. Bill impacts vary by customer class and actual implementation parameters approved by the regulator.