Meralco rates drop in Sept. on lower generation charge

Residential households in areas served by Manila Electric Co. (Meralco) will get some relief as the distributor cut its September electricity rates after two straight months of increases amid the lower cost of power purchased from suppliers.

The overall electricity rate will go down by PHP 0.1852 per kilowatt-hour (kWh) to PHP 13.0851 per kWh this month from PHP 13.2703 per kWh in August, Meralco said in a statement on Wednesday.

Households consuming 200 kWh will see their monthly electricity bills drop by PHP 37. Those consuming 300 kWh, 400 kWh, and 500 kWh will see reductions of PHP 56, PHP 74, and PHP 93, respectively.

Meralco Vice-President and Head of Corporate Communications Joe R. Zaldarriaga attributed the decline in the power rates to lower generation charge of independent power producers (IPPs) and power supply agreements (PSAs) amid a stronger peso, as their costs are mostly in US dollars.

“Charges from IPPs and PSAs went down by PHP 1.3459 and P0.3660 per kWh, respectively, due to the appreciation of the local currency against the US dollar and decrease in international fuel prices. The stronger peso affected around 99% of IPP costs and 57% of PSA costs that were dollar-denominated,” the power distributor said.

The peso closed at PHP 57.13 per dollar on Aug. 29, strengthening by PHP 1.19 from its July 31 finish of PHP 58.32.

These decreases offset the higher charges from the Wholesale Electricity Spot Market (WESM), which rose by PHP 0.3785 per kWh as average demand in Luzon and plant outages increased, as well as the increase seen from the start of the collection of the cost recovery of Sual Power, Inc. (SPI) and South Premiere Power Corp. (SPPC) under San Miguel Global Power Holdings Corp.

The Energy Regulatory Commission (ERC) earlier allowed the two companies to collect PHP 5.1 billion to be implemented over a six-month period beginning this month. The case stemmed from the 2022 joint petitions by SPPC and SPI with Meralco, seeking temporary price adjustments under their 2019 power supply agreements to recover higher fuel costs due to Russia’s invasion of Ukraine.

PSAs, IPPs, and WESM accounted for 65%, 29%, and 6%, respectively, of Meralco’s total energy requirement for the period.

Meanwhile, the transmission charge went up by PHP 0.1130 per kWh mainly due to higher ancillary service charges from the reserve market.

Other charges, including taxes, posted a net decrease of PHP 0.0379 per kWh.

“Pass-through charges for generation and transmission are paid by Meralco to the power suppliers and the grid operator, respectively, while taxes, universal charges, and Feed-in Tariff Allowance are all remitted to the government,” it said.

Meralco’s distribution charge has remained unchanged since the PHP 0.0360 per kWh in August 2022, it added.

Potential increase in October

Meanwhile, following the ERC’s approval to extend the power purchase agreement of Meralco with First Gen Corp.’s First Gas Power Corp. (FGPC), the power distributor expects an additional increase of PHP 0.32 per kWh in rates next month.

Lawrence S. Fernandez, Meralco vice-president and head of utility economics, said the contract extension resulted to an increase as it is more than what the company currently needs.

“Actually, this contract extension exceeds the current power requirements of Meralco. As of now, Meralco’s contracts — those that went through proper bidding — are already complete. And because this extension is on top of the existing contracts, it will result in an add-on to the generation charge,” he said.

The contract between Meralco and FGPC was supposed to expire on Aug. 28, but the ERC allowed Meralco to continue procuring power supply from FGPC’s 1,000-megawatt gas-fired power plant in Batangas until Jan. 31, 2026.

While there is a potential decline of PHP 0.17 per kWh due to the conclusion of the deferred fuel cost being collected by FGPC, Mr. Fernandez said this would not be enough to offset the expected rate increase.

“While this is welcome news, unfortunately, it cannot offset the 32-centavo add-on from the First Gas Sta. Rita contract extension. So now, there will be a net add-on that we will feel in the October generation charge,” Mr. Fernandez said.

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