Higher generation costs drive Meralco rates upward
The Manila Electric Company (Meralco) announced Monday that the overall rate for a typical household went up by P0.5363 to P10.1830 per kilowatt hours (kWh) from the P9.6467 per kWh last month.
This is equivalent to an increase of around P107 in the total bill of a residential customer consuming 200 kWh.
For April, generation charge went up by P0.3987 to P5.8724 per kWh from the P5.4737 per kWh registered the previous month due to higher charges from Independent Power Producers (IPP) and the Wholesale Electricity Spot Market (WESM).
"This month’s generation charge increase would have been significantly higher, but Meralco coordinated with the Energy Regulatory Commission (ERC) and some of its suppliers to again defer collection of portions of their generation costs to cushion the impact on the customers’ bills,” Meralco Regulatory Management Office headJose Ronald Valles said.
Valles said on top of the additional deferred generation charges from suppliers totaling around P945 million, the ERC also directed Meralco to defer collection of P300 million generation costs, which further reduced this month’s generation rate by about 11 centavos per kWh.
All these charges will subsequently be billed on a staggered basis over the next three months, as ordered by the ERC.
For this billing month, charges from IPPs increased by P1.4885 per kWh mainly due to the scheduled maintenance of Quezon Power plant that lasted until March 24, and the higher fuel costs of First Gas?Sta. Rita.
The Malampaya facility’s continued failure to supply sufficient natural gas resulted in Sta. Rita utilizing more expensive liquid fuel to ensure continuous supply. Peso depreciation against the US dollar also contributed to the increase in IPP charges, since around 97% of these costs are dollar-denominated.
Also weighing on the generation charge were WESM prices, which remained elevated in March. The secondary price cap was imposed 4.49 percent of the time during the supply month amid tight supply conditions in the Luzon grid.
Peak demand in Luzon rose by more than 1,500 megawatts (MW) with the onset of the dry season and increase in economic activity after Metro Manila and nearby other provinces were placed on less restrictive alert level beginning March. The higher demand and the maintenance shutdown of Quezon Power prompted Meralco to source additional supply from the WESM.
Charges from Power Supply Agreements (PSAs), on the other hand, were lower by P0.1068 per kWh due to the deferral of generation costs.
IPPs, PSAs, and WESM accounted for 31 percent, 51.6 percent, and 17.4 percent, of Meralco’s energy requirement, respectively.
With the current situation, Meralco warned that generation rates are still expected to increase in the coming months.
"On top of the deferred generation charges, the impact of the quarterly repricing of the Malampaya natural gas for the April supply will be reflected in the generation charge in May," Valles said.
"Electricity consumption historically increases during the dry months, and this is expected to also weigh on the customers’ power bills,” he added.
In addition to deferred generation charges, Meralco’s refund of P18.7 billion in distribution-related charges helped temper this month’s increase. This is equivalent to a total refund of P0.4684 per kWh for residential customers.
To recall, Meralco secured the ERC’s provisional approval to implement a P13.9 billion Distribution Rate True-Up (DRTU) refund to its customers for 24 consecutive months or until the amount is fully refunded. This is equivalent to a rate refund of P0.2761 per kWh for residential customers, implemented beginning March 2021.
The refund amount represented the difference between the Actual Weighted Average Tariff and the ERC-approved Interim Average Rate for distribution-related charges for the period July 2015 to November 2020.
Following the ERC Order in March 2022 to expand the period subject of the refund to include December 2020 to December 2021, Meralco last month started another refund to cover the additional P4.8 billion. This is equivalent to a P0.1923 per kWh rate refund for residential customers, and will be implemented for an estimated period of 12 months, or until the amount is fully refunded.
Transmission charge for residential customers had a slight increase of P0.0071 per kWh, while taxes and other charges registered a net increase of P0.1305 per kWh mainly because of higher generation costs.
The collection of P0.0025 per kWh representing the Universal Charge-Environmental Charge remains suspended as ordered by the ERC.
Meralco reiterated that it only earns from distribution, supply, and metering charges, which have remained unchanged since the reduction in July 2015.
Meanwhile, pass-through charges from generation and transmission are paid to the power suppliers and the system operator, respectively, while taxes, universal charges, and Feed-in Tariff Allowance (FIT-All) are all remitted to the government. Meralco
