MANILA, Philippines — It is one form of Christmas relief for the customers of power utility giant Manila Electric Company (Meralco) that its generation charge had been lower by P0.274 per kilowatt-hour (kWh) in this billing month to P5.51 per kWh from P5.79 per kWh previously.

The reduction in this component of the charges in the electric bills was mainly attributed to the significant downtrend in prices at the Wholesale Electricity Spot Market.

Meralco emphasized that “WESM prices fell by P3.49 per kWh” to P9.00 per kWh; following a record high of P12.49 per kWh in October – then reflected in last month’s billings.

It must be noted that the movement in generation charge is a function of supply being procured by power utilities such as Meralco. This, however accounts for a sizeable chunk of roughly 60-percent in the rates being billed to customers.

If the purchase price from power producers or sellers, like the WESM, independent power producers (IPPs) or National Power Corporation (NPC) will go down, this will correspondingly be reflected in the bills.

The nature of pass-on of this particular cost component must be revenue-neutral to Meralco, meaning, it shall not financially benefit from it but will just collect the amount based on payments made to suppliers.

Meralco indicated that its supply procurement from contracted IPPs, primarily of the First Gas plants, had been higher by P0.38 per kWh. However, this was offset by the WESM price drop, hence, the overall impact was lower generation charge for the month.

“The First Gas plants (Sta. Rita and San Lorenzo), which started utilizing banked gas in October, already had to run on regularly-priced Malampaya gas for the remainder of November,” it explained.

The utility firm added that the procurement prices from IPPs “were also affected by the peso’s depreciation against the US dollar.”

Meralco’s ratio of supply procurement had been 48 percent from its contracted power producers; and 43.1-percent from state-run NPC. Supply sourced from the spot market last month had been at 8.9-percent.

Apart from foreign exchange rate adjustments and the movement in fuel costs, there are still other factors that may cause uptrend or downward movement in the generation charge; such as constraints that may happen at fuel supply level – such as what happened in the production of the Malampaya gas field.

Meralco reasoned out that the up-tick in its generation cost in October had been due to the “maintenance shutdown of the Malampaya gas pipeline” which stretched for almost a week from October 20-26.