Malampaya gas repricing to ease Meralco rate hike

The scheduled repricing of the Malampaya gas on contracted power capacity being delivered to Manila Electric Company (Meralco) is seen tempering the utility firm’s projected upward adjustment in electric bills for February billing cycle.

According to Meralco Vice President and Spokesperson Joe Zaldarriaga, there is no clear direction yet on the overall rates pass-on for this month, as the expected increase may be partially or fully offset by the slated gas repricing as well on softer prices in the Wholesale Electricity Spot Market.

Based on the utility firm’s preliminary estimates, Zaldarriaga emphasized “There is an upward pressure on the electricity rates this month,” noting though that they have yet to receive all final billings from suppliers.

In particular, he stated that “we expect the lower natural gas prices as a result of Malampaya’s quarterly repricing to further help temper any increase in other bill components.”

The Malampaya gas pricing is oil-linked and it is benchmarked on Dubai crude prices. Gas pricing adjustments are done on quarterly basis – and that is anchored on the contractual provisions that Meralco had agreed with its gas-fed power suppliers.

Zaldarriaga similarly explained that the initially anticipated increase will be “due to the completion of a distribution-related refund equivalent to around P0.19 centavos per kWh (kilowatt hour) for residential customers.”

He was quick to qualify though that “we are optimistic that this can be mitigated by lower WESM prices given the improved Luzon grid situation amid lower demand and less power plants on outage, as well as the absence of yellow alert in the last supply month.”

Within this month, the Malampaya gas production facility will be on scheduled shutdown for two weeks (February 4-18) that could precipitate tariff uptick on onward billings primarily at the kick-off of summer in March.

Nevertheless, the Department of Energy (DOE is expecting a "best case scenario" that the fuel shift of the gas plants will not trigger spiral in the rates. DOE is not also expecting any disruption of supply on the duration of the gas production facility’s maintenance downtime.

The main situation that will place Luzon grid in the "danger zone" will be the high-demand months of summer, hence, this is now the sharp focus of remedial measures being sorted by the DOE and industry players.