The falling value of the Philippine peso versus the US dollar is seen driving up the electric bills of Manila Electric Company (Meralco) customers in their July billing.
Meralco Vice President Lawrence S. Fernandez noted that the fluctuation in the foreign exchange (forex) rate could adversely impact this month’s pass-on tariff because some of the power utility’s suppliers have their rates denominated in US dollar.
“First Gas and Quezon Power have tariffs that are more than 90-percent dollar-denominated, thus a depreciation of the peso will generally lead to higher generation costs,” he stressed, in reference to the gas and coal-fired generated capacities contracted by Meralco as part of its supply portfolio.
The electricity generation of the 460MW Mauban coal-fired power plant of Quezon Power; as well as the 1,000MW Santa Rita and 500MW San Lorenzo gas-fired facilities have been the duly contracted independent power producers (IPPs) of the country’s biggest power utility company.
“For July rates, we see the peso’s recent depreciation and high WESM prices experienced during the June supply month as factors pushing up the generation charge,” Fernandez conveyed.
Apart from forex, the aggravating factor that will trigger escalation in rates would be the higher settlement prices in the Wholesale Electricity Spot Market (WESM) last month – in which the secondary price cap had been hit numerous times because of the relentless spikes in prices across trading intervals.
“Typically, an increase in demand and/or reduction in generation capacity in the Luzon grid will tend to push up WESM prices,” the Meralco executive qualified.
The June supply month had been strained with series of yellow and red alert conditions in the Luzon grid – primarily due to deficient power reserves; and there was also an episode of rotational power interruptions due to tripping of a transmission line.
“For July rates, we see the peso’s recent depreciation and high WESM prices experienced during the June supply month as factors pushing up the generation charge,” Fernandez emphasized.
He primarily cited that the Luzon grid was placed on ‘red alert’ status last June 18; and the grid was also on ‘yellow alert’ for several days during the week of June 20 — with him qualifying that “such alerts indicate a tight supply-demand situation, which generally means higher WESM prices.”
The Meralco executive said the Malampaya gas repricing is also a factor in the cost swing of the generation charge, but he pointed out, this will not be reflected yet in the July billing – instead, that is expected in the August generation charge pass-on cycle.
The country’s giant electric utility will announce its rate adjustments in the coming days, but the power firm executive indicated that they are still waiting for the billings from their various power suppliers.
The anticipated hike in the electric bills is viewed as another financial burden out to cause added suffering for the Filipino consumers, amid the rising costs also of fuel, transport fares as well as basic commodities.