Meralco to reduce electricity rates this month

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A Meralco lineman works at an electric post along V. Luna in Quezon City. — Michael Varcas / PHILIPPINE STAR

By Victor V. Saulon, Sub-Editor

HOUSEHOLDS can expect a reduction in the cost of electricity in January as Manila Electric Co. (Meralco), the country’s biggest distribution utility, announced on Wednesday it will lower rates by P0.5260 per kilowatt-hour (kWh).

This brings the overall rate to P8.7227 per kWh from P9.2487 per kWh previously. A typical residential customer with a 200-kWh consumption will see their monthly bill reduced to around P105.

Households consuming 300 kWh, 400 kWh and 500 kWh will see a reduction of P157.8, P210.4 and P263, respectively, in their monthly bills.

“The lower January rate is mainly due to a P0.5277 per kWh reduction in the generation charge,” Meralco said in a statement.

The reduction is the second straight month of decrease in overall electricity rates, the company said, placing the total reduction at P0.9045 per kWh during the two-month period.

Meralco said lower power supply agreements (PSAs) as well as lower charges at the wholesale electricity spot market (WESM) largely contributed to the drop in the generation charge to P4.0768 per kWh in January from P4.6045 per kWh in December.

Charges from the supply contracts were down by P0.9810 per kWh, the company said.

“The lower PSA charges were brought about by a reduction in capacity fees as a result of the annual reconciliation of outage allowances done at the end of each year under the PSAs approved by the Energy Regulatory Commission (ERC),” it said.

“The reduction in capacity fees of generator companies represents savings immediately passed on to consumers by way of lower electricity rates. The capacity fees from PSAs will return to normal levels after the downward adjustment this month. PSAs provided 40% of Meralco’s total energy requirement,” it added.

Lower spot prices because of the drop in power demand within the Luzon grid accounted for the decrease in WESM charges by P1.6943 per kWh, the company said. Purchases at the spot market made up 19% of Meralco’s total requirement for the month.

In contrast, charges from independent power producers increased by P0.3808 per kWh because of the lower average plant dispatch. Their share to Meralco’s requirement this was at 41% this month.

Transmission charge of residential customers also rose in January by P0.1168 per kWh because of higher ancillary service charges from the National Grid Corporation of the Philippines (NGCP). The rise was offset by a decline in taxes and other charges by P0.1151 per kWh.

“Meralco’s distribution, supply, and metering charges, meanwhile, have remained unchanged for 30 months, after these registered reductions in July 2015,” the company said as it reiterated that it does not earn from the pass-through charges, such as the generation and transmission charges.

“Payment for the generation charge goes to the power suppliers, while payment for the transmission charge goes to the NGCP,” it said, adding that taxes and other public policy charges are collected by government.

Separately, Meralco President Oscar S. Reyes said he wanted to be able to assure consumers in the utility’s franchise areas “that we will have adequate, reliable, least cost power.”

“That’s why ERC approval of our PSAs is critical,” he told reporters, referring to seven Meralco supply contracts that are pending with the regulator.

Meralco was hoping to see the approval of the contracts by end-2017 but the Office of the Ombudsman ordered the suspension of the four ERC commissioners and its former chairman for a year, leaving the regulator without a quorum to approve PSAs.

“It may put at risk the capability of the industry to assure not only supply to customer but security of supply moving forward,” Mr. Reyes said.

He said the vacuum at the ERC has placed at risk the country’s growth trajectory in view of the “critical pending issues” relating to the operations, investments, building of new power plants, power supply to distribution utilities and electric cooperatives.

“So I think it’s quite critical that the ERC be restored to its regular functioning position,” he said.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls.

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