While most consumers expected radical spike in electricity rates, power utility giant Manila Electric Company (Meralco) had announced a rather moderate hike of P0.4621 per kilowatt hour (kWh) in its overall pass-on tariff that will be reflected in the bills of consumers this May.

For residential end-users, the all-inclusive rate will hover at P11.4139 per kWh from last month’s P10.9518 per kWh; hence, for households with average usage of 200 kWh, their bills will incur aggregate increase of P92 in this billing cycle and P138 for those with 300 kWh consumption level.

As anticipated, the main trigger in this month’s rate uptick had been the generation charge – which is the component which accounts for more than 50% of all the segregated cost items in the bill.

“Driving this month’s overall rate increase was the generation charge which went up by P0.4455 per kWh primarily due to higher costs from the Wholesale Electricity Spot Market (WESM) and power supply agreements (PSAs),” Meralco noted.

For the other line items in the bill, it was conveyed that the net increase for transmission, taxes and other charges hovered at P0.0166 per kWh.

On power chunk sourced from the spot market, in particular, the consequent increase rounded up to P1.7913 per kWh “due to the tight supply condition in the Luzon grid during the April supply month as demand went up by 2,401 megawatts (MW).”

Primarily, there had been five (5) days of combined red and yellow alert declarations in the grid; and 3 days of yellow alert – and the full cost impact had been carried in the March 26-April 25 billing cycle, which is the basis of the overall rate for the May billing.

Owing to the supply-strained condition in the grid, it was specified that the secondary price cap had been enforced 19% of the time; or more than double from the previous billing month; and that essentially entails series of high settlement prices for traded capacities in the WESM.

It was also apparent that in Meralco’s supply procurements last month, it has very high exposure in the spot market at 30%; but it propitiously survived unwarranted surge in electricity rates that could agitate consumers to an unwarranted degree.

Supply drawn from its power supply agreements (PSAs), on the other, reached 36% and that posted corresponding increase of P0.2871 per kWh “due to lower excess energy deliveries of some PSAs,” - primarily those that were priced at a discount.

The utility firm said there were also other charges “from an emergency PSA that covered Meralco’s supply requirements” specifically for contracts that are still going through approval processes by the Energy Regulatory Commission.

The cost-offsetting, so far, came from the contracted independent power producers (IPPs) which had 34% share in the supply pie -- because invoiced capacity deliveries had been down by P0.6942 per kWh “due to higher average (plant) dispatch and lower fuel prices.”

Meralco highlighted that the IPP charges this month still had withheld cost recovery component in gas costs drawn from the Malampaya field due to the ongoing regulatory scrutiny of the new gas sale and purchase agreement (GSPA) between First Gen and the Malampaya consortium led by Prime Energy of the Razon group.