Meralco power rates increase in March

Over eight million customers served by Manila Electric Co. (Meralco) will have to tighten their belts this month as the power distributor announced a rate hike, citing higher transmission and generation charges.

However, Meralco consumers may see even higher bills in April as the widening Middle East war continues to drive up global oil prices.

In a statement on Tuesday, the company announced an increase of PHP 0.6427 per kilowatt-hour (kWh), bringing the overall rate to PHP 13.8161 per kWh in March from PHP 13.1734 per kWh in February.

The upward adjustment translates to an increase of around PHP 129 in the electricity bills of typical consumers consuming 200 kWh. Households consuming 300 kWh, 400 kWh, and 500 kWh will have to pay an additional PHP 193, PHP 257, and PHP 321 in their bills.

Driving this month’s power rate hike was the P0.2880 per kWh increase in transmission charge, fueled by higher costs of ancillary service procured by the grid operator from the reserve market.

The costs from the reserve market, an avenue where generators sell backup electricity capacities, accounted for almost half of the total transmission charge for the period.

Also contributing to the upward adjustment was the generation charge which increased by PHP 0.2209 per kWh to PHP 7.8607 per kWh. Fixed charges from the second extension of the power purchase agreement with a gas-fired power plant in Batangas added around PHP 0.38 per kWh to this month’s generation charge.

These offset the decline in the cost of power procured from the Wholesale Electricity Spot Market (WESM) amounting to PHP 1.0952 per kWh, as supply conditions in the Luzon grid improved.

Meralco began collecting the PHP 0.2817 per kWh price adjustment sought by four power generators for fuel costs recovery, as approved by the Energy Regulatory Commission (ERC).

The impact of this adjustment, totaling about PHP 789 million, was more than offset by the completion of the recovery of a previous adjustment which amounted to PHP 858 million.

Other charges, including taxes, registered a net increase of PHP 0.1338 per kWh.

This month’s rate also reflected the implementation of the new uniform national lifeline subsidy rate of PHP 0.01 per kWh in accordance with an ERC directive earlier this year.

“Pass-through charges for generation and transmission are paid to the power suppliers and the grid operator, respectively; while taxes, universal charges, and renewable energy subsidies are all remitted to the government,” the company said.

Meanwhile, Meralco’s distribution charge remained unchanged since the PHP 0.0360 per kWh reduction in August 2022.

Higher rates loom

Meanwhile, the recent surge in fuel prices did not contribute to this month’s electricity rate hike but could impact rates next month, according to Joe R. Zaldarriaga, Meralco’s vice-president and head of corporate communications.

“(The increase) will probably be felt next month in April, based on the current March supply month,” he said at a press briefing in Filipino.

Mr. Zaldarriaga said that the expected rise in power demand amid the onset of summer months, exacerbated by the Middle East war, “are most probably going to drive prices higher.”

While oil does not form part of Meralco’s power supply, the rise in global fuel costs could trigger increases in coal and gas prices as well, which the company largely depends on for supply.

Currently, gas accounts for 60% of Meralco’s power supply requirements, followed by coal at 20-25%, and renewable energy at 10%. The rest is sourced at the country’s electricity spot market.   

Lawrence S. Fernandez, vice-president and head of utility economics, said that higher fuel costs will affect electricity rates, although the extent will depend on how long the situation in the Middle East continues.

“Actually, the increase in global oil prices has no direct impact on generation costs in Luzon. But Luzon’s power generation uses liquefied natural gas and coal, and usually, when there’s pressure from rising oil prices, both liquefied gas and coal tend to follow,” Mr. Fernandez said.

Meralco Chairman Manuel V. Pangilinan said last week that the company will undertake a comprehensive reassessment of its fuel position and sourcing strategy.

“We want to ensure adequate supply of power and manage price volatility as responsibly as possible. Have made it clear to the team that we must help protect consumers as cost of goods rises globally,” he said in a post on X.

Meralco Executive Vice-President and Chief Operating Officer Ronnie L. Aperocho said the company is “closely coordinating” with its power suppliers to keep generation charges at least-cost while prioritizing reliability across its system.

“We are optimizing our energy mix and fully leveraging cost-efficient sources, regardless of technology. In addition, we are carefully managing our exposure to the WESM, where price volatility is high,” he said in a separate statement on Tuesday.

He said the company will also secure lower-cost replacement power whenever needed.

In line with the government’s call to strengthen energy efficiency across all sectors, Mr. Aperocho has called on the industrial and commercial customers to participate in the Interruptible Load Program, a proactive measure to help preserve available supply should de-loading from the grid become necessary.

For residential customers, he said the company is intensifying its efforts to provide simple and actionable tips for households to better manage their electricity consumption.

Meralco is the country’s largest private electric distribution utility, serving more than 8.2 million customers in Metro Manila and nearby provinces, including Bulacan, Cavite, Rizal, and parts of Laguna, Batangas, Pampanga, and Quezon.

Meralco’s 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. — Sheldeen Joy Talavera, Reporter