From getting sunburnt due to extreme summer heat, the roughly 8.0 million customers of Manila Electric Company (Meralco) will be confronted with another harsh reality of P0.6436 per kilowatt hour (kWh) rate hike that will squeeze their wallets tight this June billing cycle.
As announced by the utility firm, the overall tariff for its residential customers will rise to P12.0575 per kWh from a leaner level of P11.4139 per kWh last month.
For household consumers that are having base consumption of 200-kWh, the calculated increase in their bills will be P129; while those in the 300kWh usage band will have to pay P193 more.
Meralco explained that this billing month’s rate escalation had been mainly attributed to higher generation charge of P0.3466 per kWh – and that was primarily triggered by surge in the cost of capacities purchased via the Wholesale Electricity Spot Market.
In particular, Meralco stated that WESM charges in the last supply month spiked by P1.5203 per kWh “due to tight supply conditions as average demand went up by more than 1,200 MW.”
The Luzon grid had been placed on yellow alert for 12 days; and also suffered red alert condition last May 23; hence, prompting “persistently high spot market prices” and that also precipitated the enforcement of secondary price cap for at least 19% within the billing cycle’s duration.
Additionally, the transmission charges due to the ancillary services procurement of the system operator had been up by P0.1450 per kWh – that was “following the partial settlement of the 30% of the total reserve trading amount of all WESM trading transactions during the March 2024 supply period;” that had been previously deferred for cost recovery on the order of the Energy Regulatory Commission.
Exerting further pressure on the June billing cycle had been the newly approved feed-in-tariff allowance (FIT-All) of P0.0838 per kWh, which had been more than double from the previous charge of P0.0364 per kWh.
Beyond the upward adjustments in the specified line items in the electric bill, taxes and other charges also posted net increase of P0.1046 per kWh.
The utility firm indicated that the full tariff reflected in this billing month would have been higher if its power suppliers had not agreed to defer part of their cost recoveries.
Meralco Senior Vice President and Head of Regulatory Management Office Jose Ronald V. Valles primarily noted that “the increase in the generation charge this month would have been higher but Meralco took the initiative to cushion the impact of the higher pass-through costs to our customers with the help from some of our suppliers which deferred the collection of portions of their generation costs.”
As emphasized, three of its power suppliers – Quezon Power Philippines, San Buenaventura Power Ltd. Co. and South Premiere Power Corp, had agreed to temporarily put off collection of at least P500 million worth of generation charges – and such costs will be recouped on staggered basis in the successive three billing months.
That in turn, Meralco said, tamed the generation charge pass-on in June billing by at least P0.1313 per kWh.
In forthcoming billing months, Valles qualified that one development they are awaiting is the approval of their power supply agreement for capacity procurements from Limay Power Inc, with him noting that such “could significantly reduce our WESM exposure and generation costs.”
On supply sourcing, capacities drawn from contracted independent power producers (IPPs) had been up by P0.0224 per kWh – net of the deferred generation charges; and that was mainly attributed to “lower average IPP dispatch and peso depreciation affecting around 98 percent of IPP costs that were dollar-denominated.”
The uptrend in IPP costs, according to Meralco, had been tempered by the P0.2988 per kWh decline in the billed charges of power supply agreements (PSAs); primarily due to deferred pass-on and lower fuel costs of South Premiere Power Corp as well as that of San Buenaventura Power.
It is apparent that Meralco had very high spot market exposure last month at 33 percent level; while supply sourcing from PSAs hovered at 38 percent; and IPP procurements topped 29 percent.