Meralco sets ₱1.8-B bad debts provision due to extended ‘no disconnection’

Power utility giant Manila Electric Company (Meralco) has set ₱1.8 billion provision for ‘bad debts’ or ‘credit loss’ because of the extended ‘no disconnection’ policy being enforced by the government for consumers that have unpaid bills.

“Given that there is an extension on the no-disconnection for customers, which are the lifeline customers – 100 kilowatt hours and below, we’ve extended our evaluation. Our total expected credit loss for the year is ₱1.8 billion,” Meralco Chief Finance Officer Betty Siy-Yap said.

She explained that the ‘bad debts provision’ is part of the company’s “regular evaluation, based on accounting standards that will require us to assess expected future credit losses.”

But from the level it is currently pegged at ₱1.8 billion, the Meralco executive noted that the figure may likely change when the utility firm will carry out its next round of evaluation by mid-year.

“We expect this to be lower given the payment patterns and the payment collections that we’ve been receiving from these customers,” Yap said, in reference to the lifeline customers and subscribers that made installment payment arrangements (IPAs) with Meralco.

As of January this year, it was noted that at least 27,000 customers of Meralco have entered into IPAs – and these are a mix of lifeline-users and the non lifeline customers that have arrears since the enforcements of enhanced community quarantine (ECQ) and modified ECQ (MECQ) measures last year.

Meralco President and CEO Ray C. Espinosa further indicated that while they have customers who opted for extended payment plans, “they actually pay, so it’s safe to say that there’s high percentage of collection.”

He added that “for the lifeliners, the collection rate is as high as 85%; and if they feel that they cannot pay, they are actually responsible enough to approach Meralco to ask for installment payment plan.”

Given that customer mindset, he opined that such “reflects basically a very good paying attitude on their part, so I think this provision that we have upon review may probably result in some significant reduction if the trend continues on the payment of the lifeliners.”

Last month, the Department of Energy (DOE) formally issued an advisory directing power utilities like Meralco and even the electric cooperatives (ECs) to further stretch the “no disconnection” policy – primarily for lifeline consumers, even if they fail to pay their bills.

That particular edict does not have an end-date yet, so it remains a guessing game also for power utilities how will this impact on their financial performance this year.

As culled from data, the lifeline customers of Meralco that can be covered by the extended ‘no disconnection rule’ could hit as high as 2.6 million; while for the electric cooperatives, this could shield about 3.35 million customers from any immediate service cut-off.