By MYRNA M. VELASCO

The roughly 8.0 million customers of Manila Electric Company (Meralco) will suffer ‘electric shock’ from its P2.1496 per kilowatt hour (kWh) hefty rate hike in the July billing, which were triggered by uptick in the generation charge with high exposure in the Wholesale Electricity Spot Market (WESM) and the pass-on of the previously deferred charges of its contracted power suppliers.

The overall tariff reflected in the bills of consumers this billing cycle had been at P11.6012 per kilowatt hour (kWh) versus last month’s P9.4516 per kWh – and that redounds to a punishing P430 surge in the bills of average household end-users in the 200-kWh consumption bracket; and P645 for those with 300kWh usage.

According to Meralco, its exposure in the spot market last month was at very high level of 34% - and that came at a time when WESM charges had surged by a record high P6.6370 per kWh, due to integrated deferred cost recoveries.

For the generation charge, which accounts for more than 50% of the aggregate costs passed on in the electric bills, the power firm stated that the increase was at P2.0021 per kWh.

Conversely, the transmission charge had been down by P0.1550 per kWh “due to the absence of reserve market settlement charges that affected last month's ancillary service charges,” while taxes and other charges went up by P0.3025 per kWh.

While consumers are gnashing their teeth of such heavy financial burden on their electric bills this month, Energy Regulatory Commission (ERC) Chairperson Monalisa C. Dimalanta indicated that “the P2.0021 per kWh generation rate increase is higher than expected.”

She qualified though that the rates will be “subject to the Commission’s validation pursuant to our cost adjustment (over- or under-recoveries) adjustments.”

Dimalanta added “the higher rate is expected, particularly for Meralco, since they are implementing two staggered payment schemes – one arranged by them with their IPPs and the other as ordered by the Commission on WESM purchases.”

The utility firm’s sourcing from the spot market was even higher than the scale of procurement it had from contracted independent power producers at 28%; and almost at the level of its supply sourcing from power supply agreements (PSAs) at 38%.

The country’s power utilities have been consistently reminded on scaling down their spot market exposure during the summer months – because that will extremely punish their customers with upticks in electric bills.

As emphasized by Meralco Vice President Joe Zaldarriaga, the utility firm’s high exposure in the spot market had been due to the delayed regulatory approval of its PSAs, primarily the contracted 400-megawatt capacity that it was expecting to add up to its summer power supply.

Beyond the cost impact of high spot market sourcing, Meralco conveyed that there was also “normalization” of rates, because of the cost recoveries following the artificial drop in prices last month.

The company expounded that if based on June supply month alone, WESM charges were actually down, but the resulting tariff was still higher because of the previously-deferred cost recoveries.

And the financial pain of Meralco consumers on high rate may still not end this July, because additional cost recoveries of P0.77 per kWh monthly would still be carried in the August and September billing – and their consequent impact will be rate hike pressure in the bills.

For the month of June alone, the power firm reported that demand in the Luzon grid already declined by 900 megawatts, hence, that could have resulted in price reduction; but the cost mismatch from cost recoveries yielded a contrary result.

“Mitigating the increase was the reduction in spot market prices as average demand in the Luzon grid decreased by about 900 MW. The secondary price cap was also triggered only 6.6 percent of the time for this supply month from previous month’s 19.3 percent,” the power firm stressed.