Utility giant Manila Electric Company (Meralco) braces for regulatory hurdles on its proposed cost recoveries of P3.821 billion accounting for its supply purchases from the Wholesale Electricity Spot Market.

The costs that the company has been batting to recoup, on separate petitions, are part of the under-recoveries that may prop up its bottom line once approved by the Energy Regulatory Commission.

Of the amount, Meralco documents showed that P2.701 billion were disallowed costs on its total WESM purchases for the periods from December 2006 to May 2007.

Meralco formally questioned the cost disallowances, noting that the purchases it made from the WESM were prudent and mandated by law.

The utility firm further argued that such costs “were just and reasonable pass-through costs recoverable from its customers.” The ERC has yet to resolve Meralco’s motion on the case.

The P1.12 billion, on the other, represents WESM cost differential as ERC policy limited to or set at National Power Corporation’s average rate pricing the spot market purchases going beyond 10 percent.

A component of the cost differential, it was noted, had been for condensate which was used by Meralco’s contracted independent power producer as replacement fuel during the maintenance shutdown of the Malampaya gas facility.

“During the pipeline’s outage, the natural gas plants had to use higher priced condensate fuel to continue power production,” Meralco noted.

The ERC, however, noted that the proposed cost differential shall be subject to further evaluation.

Meralco qualified that it petitioned the regulator on deferred recovery of the fuel cost differential on condensate as a way to mitigate the impact on consumers, as generation charge for the April billing period went up by as much as P1.83 per kilowatt hour.