MANILA - Manila Electric Co. (Meralco), the country’s largest power distributor, said Monday that it has increased its core net income by 2.1% to P2.893 billion in the first half of the year from P2.833 billion during the same period in 2008.

In a disclosure to the Philippine Stock Exchange, Meralco reported a 19.2% increase in consolidated (power- and nonpower-related businesses) net income to P3.2 billion in the first half of the year from P2.8 billion during the same period last year.

Meralco said the improvement in core net income was brought about by the 10.4% increase in distribution revenues owing to the implementation of the performance-based regulation (PBR) scheme and the 3.8%t decrease in operating and maintenance expenses.

The PBR-based rate, according to Meralco, was inclusive of the collection of under-recoveries incurred in 2007, which contributed P601 million to distribution revenues for the first six months of the year.

The power utility said future rate petitions will incorporate the balance of any 2007 under-recovery and those that maybe incurred for succeeding periods.

Consolidated revenues, of which electricity sales account for 98%, decreased slightly by 1.5%, largely due to the 7.1% drop in kilowatt-hour (kWh) consumption by the industrial sector.

Meralco said commercial sales continued to drive energy consumption as these rose by 2.2% compared with that of last year and that retail trade also continued to push sales.

The residential electricity segment improved by 1.9%. However, the drop in industrial sales offset these gains which declined by 7.1% as a result of the significant drop in manufacturing demand and closure of some businesses.

Meralco’s customer base also increased by 2.6% to 4.63 million in the first half of the year with 107,508 new residential customers recorded and 8,771 new commercial customers added since June last year. A total of 123 customers reduced the industrial customer profile as of end-June.

Meralco said nine self-generating customers returned to the Meralco grid, sourcing 100%of their energy requirements from the power utility, adding about 138,209 megawatt-hours to the total kWh assumption in the first half of the year.

Self-generation became more expensive with the increase fuel prices and Meralco rates, particularly its time-of-use program and blended rate, became more attractive, Meralco said.

The return of these self-generating companies added 138.2 gigawatt-hours of energy sales, helping improve distribution revenues and lower overall systems loss.

“We continue to manage system loss levels, and we are confident that on a full-year basis, 2009 performance would be better than last year,” Jose de Jesus, Meralco president and chief operating officer, said.

He added that the company is also able to meet all regulator-imposed service parameters, which is manifested in better customer service today.

“We remain upbeat about a possible sales uptrend. The signs are encouraging so far. However, we have to continue working on regulatory approvals with respects to our under-recoveries that may impact our full year operating results,” said Manuel Lopez, Meralco chairman and chief executive, adding that they also stand by an earlier decision to enter retail electricity with a power supply option program likely to be implemented early next year.