Electricity rates to go down in July, says Meralco

CUSTOMERS of Manila Electric Co. (Meralco) will pay a lower rate of about 71 centavos per kilowatt-hour (kWh) in July after the energy regulator called for a refund of a previous over-collection, offsetting an increase in the power generation charge.

“It’s basically good news for Meralco customers as we are announcing a 71-centavo rounded off rate reduction for the residential consumers this month of July 2022,” said Meralco Spokesperson and Head of Corporate Communications Joe R. Zaldarriaga in a press briefing on Monday.

Meralco said the reduction came after the Energy Regulatory Commission (ERC) directed the utility to refund P21.8 billion following the validation of its applicable tariff for July 2015 to June 2022.

As a result, the overall rate in July will go down by P0.7067 per kWh to P9.7545 per kWh from P10.4612 per kWh in June.

Households consuming 200 kWh will see a P141 decrease in their monthly power bill. Those consuming 300 kWh, 400 kWh, and 500 kWh, will see their monthly bills decline by P212, P283, and P353, respectively.

“The immediate implementation of the ERC decision was able to more than offset the impact of higher generation charge this month to the benefit of our customers,” Jose Ronald V. Valles, Meralco’s head of regulatory management, said separately in a press release.

The refund will be 87 centavos per kWh for residential customers and will appear as a separate line item called “Distribution True-up 4” in the power bills starting this July.

On the other hand, there is an increase in the generation charge of 22 centavos per kWh in July to P6.7756 per kWh from the P6.5590 per kWh registered in June.

Mr. Zaldarriaga said that the increase is primarily caused by the increase in the prices at the wholesale electricity spot market (WESM) of P3.9649 per kWh.

Meralco also reported an increase in charges from power supply agreements (PSAs) by P0.3186 per kWh and a decrease in charges from independent power producers (IPPs) by P0.4669 per kWh.

“Mitigating factor however was the rates of the independent power producers, which went down by 47 centavos per kWh,” Mr. Zaldarriaga.

PSAs, IPPs, and the spot market accounted for 50%, 43%, and 7%, respectively, of Meralco’s energy requirement for the period.

“[In] the May versus June 2022 daily Luzon weighted average price, there were a series of yellow and red alerts for the June 2022 supply month which led to the pressure of WESM prices to go up,” Mr. Zaldarriaga said.

The yellow alerts, a warning of thinning power reserves, were placed by National Grid Corporation of the Philippines (NGCP) due to the forced outage of several power plants from June 20 to 22. The red alert was placed on June 18 due to the tripping of NGCP’s Hermosa-BCCP 230 kilovolt lines 1 and 2, which isolated several power plants.

Mr. Zaldarriaga said that 16 out of 41 times last month, the secondary price cap, a price-mitigating mechanism imposed when there are persistent high prices at the spot market. It was triggered 35.71% of the time, the highest incidence of secondary price cap imposition since the start of the year.

He also factored in peso depreciation and continued increase in international coal prices as reasons for higher generation costs.

“There was a steep depreciation of the peso from P52.37 in May to almost P55 in June,” Mr. Zaldarriaga said. “The generating plants utilize majority of their expenses using dollar-denominated expenses.”

Meralco placed the cost components in the July rate as: P0.2166 for power generation; P0.0012 for transmission; P0.8656 for distribution rate true-up; and P0.0565 for other charges such as taxes, subsidies, and feed-in tariff allowance.

Distribution, supply, and metering charges, where Meralco gets its income, remained unchanged since the reduction in July 2015.

Generation charges are paid to the power suppliers, transmission charges are paid to the system operator, and the other charges are all remitted to the government.

On Monday, shares in the company rose by 1.14% or P4 to close at P354 apiece at the stock exchange.

Meralco is the largest power distribution company and the largest private-sector utility in the Philippines. Its controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Justine Irish DP. Tabile