Electricity rates are expected to rise again in this billing month due to a confluence of factors such as the peso depreciation versus the US dollar, and uptick in the oil spot market prices, according to the Manila Electric Company (Meralco).

“There may be a high probability for an increase in the generation charge for August 2021 due to peso depreciation, increase in Malampaya natural gas prices and high WESM (Wholesale Electricity Spot Market) prices in the first half of July,” Meralco Vice President and Spokesperson Joe Zaldarriaga said.

The generation charge, which accounts for more than 50-percent, is the biggest component in the overall tariff being passed on to ratepayers by distribution utilities, like that of Meralco.

Zaldarriaga explained that on the foreign exchange rate factor, the Philippine peso versus the US dollar closed at P49.97 in July compared to a leaner P48.80 the prior month.

“The peso depreciation will have an impact on dollar-denominated charges of power suppliers,” the Meralco executive stated, and this is primarily in reference to the legacy independent power producer (IPP) contracts as component of the supply being wheeled into the utility firm’s load network.

Additionally, on Malampaya natural gas prices, Zaldarriaga emphasized that this is anticipated “to increase due to its quarterly repricing to reflect increase in crude oil prices.”

To note, the price of the Malampaya gas which feeds on power plants supplying a significant pie of Meralco’s supply portfolio is heavily linked to crude oil prices, hence, the upswing on global oil prices will also manifest on the quarterly gas repricing.

Zaldarriaga particularly cited that Asian oil pricing benchmark Dubai crude was at US$71 per barrel as of end-June, and that would serve as a basis in the adjustment of the Malampaya gas price.

The Meralco executive further noted that “despite decrease in Luzon demand due to cooler temperature and monsoon rains, supply remained tight in the grid due to plant outages.”

In fact, system operator National Grid Corporation of the Philippines (NGCP) was still prompted to declare ‘yellow alert’ last July 13 – and that’s mainly due to insufficiency of reserves in the Luzon grid system.

Given the lingering strained power supply situation in the country’s main power grid, it was also apparently noted that spot market prices remained high in the first half of July.