The earlier-anticipated hike in the electricity rate of Manila Electric Company (Meralco) was overturned, resulting in overall reduction of P0.1185 per kilowatt hour (kWh) in the February billing cycle due to the "cover cost" or compensation generated by power supplier First Gen Corporation (FGen).

The "cover cost" was a result from the "gas restriction" FGen suffered last year in its gas sale and purchase agreement (GSPA) with Shell Philippines Exploration B.V. (SPEX), the operator of the Malampaya gas field.

Meralco Vice President Lawrence S. Fernandez explained that First Gas “received cover cost from SPEX, for the gas restriction from prior months, and the amount was large enough to offset the increase in Malampaya price.”

As a result, the all-inclusive tariff of Meralco this February billing would then be pared down to P9.5842 per kWh from the January pass-on rate of P9.7027 per kWh, according to the utility firm.

Fernandez said the "cover cost" accounts for “compensation when there is supply restriction from Malampaya and that accrued from prior months and it’s just reflected this month.”

For Meralco customers in the 200-kWh consumption bracket, the aggregate reduction in their electric bills this month will amount to P24 and P35 cut for those in the 300-kWh usage band.

The power firm’s generation charge for the month had been down by P0.2305 per kWh to P5.1957 per kWh from the previous billing cycle’s P5.4262 per kWh; with it emphasizing that the ‘compensation cost’ for First Gen had cushioned the increase from its gas-repricing for the period.

“The IPP (independent power producer) charges reflected a reimbursement from SPEX to First Gas covering a portion of incremental fuel cost incurred in relation to the use of liquid fuel during unplanned Malampaya gas supply restrictions,” Meralco expounded.

It reiterated that the cost reimbursement to First Gen “were able to more than offset the increase in Malampaya natural gas prices resulting from its quarterly repricing; and an increase in coal prices.”

The gas plants of First Gen under contract with Meralco are the 1,000MW Santa Rita; 500MW San Lorenzo and 414MW San Gabriel plants – and these have been the generating facilities affected by Malampaya field’s gas restriction dilemma.

For the other cost components, the ancillary services charge pass-on of system operator of National Grid Corporation of the Philippines had increased by P0.0454 per kWh; while taxes and other charges had likewise been higher by P0.0666 per kWh.

Fernandez added that Meralco’s volume of procurement from the Wholesale Electricity Spot Market (WESM) likewise declined substantially to just 0.4-percent in the January supply month; hence, it was able to avoid high exposure with the escalated spot market prices.

“Our spot trading amount correspondingly went down. And the IEMOP (Independent Electricity Market Operator of the Philippines) reflected negative bill adjustment, that’s why the total WESM charges became net negative,” he stressed.

On the whole, the cost adjustment in supply purchases of Meralco from its power supply agreements (PSAs) with generation companies had been up by P0.1631 per kWh on lower demand that led to lower excess energy deliveries.

The bulk of Meralco’s capacity purchases last month had been with its contracted IPPs with a share of 52.2-percent; while PSAs accounted for 47.4-percent and the marginal balance had been from the spot market.