CONSUMERS will see a P0.0265 per kilowatt-hour (/kWh) hike to P10.2190/kWh in their August electricity bills, Manila Electric Co. (Meralco) said on Tuesday.
This is the second straight month that power rates will increase for the distribution utility’s 6.4 million customers.
The company attributed the higher rates to the increase in the charges in its power supply agreements (PSAs), which pushed up the generation charge, the biggest component of consumers’ monthly bill at nearly 60%.
Meralco said the “slight increase” translates into a rise of P5.30 in the monthly bill of a typical household consuming 200 kWh. The corresponding increase for those using 300 kWh, 400 kWh and 500 kWh is P7.95, P10.60 and P13.25, respectively.
In a press conference, Meralco spokesman Joe R. Zaldarriaga attributed the higher PSA charges to lower average plant dispatch plus higher fuel prices, even as energy prices in the spot market and those from independent power producers declined.
The generation charge for the month increased to P5.3491/kWh from P5.2651/kWh after PSA charges rose by P0.6554/kWh. These power supply deals accounted for 43% of the utility’s requirement in the July supply month.
In contrast, charges from the Wholesale Electricity Spot Market (WESM) slipped by P1.1021/kWh with the absence of “yellow alerts” in the Luzon grid during the month, which could have prompted purchases of costlier power.
Meralco also said despite higher Malampaya natural gas prices after the quarterly repricing to reflect recent movements in global crude oil prices, the cost of power from independent power producers (IPPs) dropped by P0.1690/kWh as average plant dispatch improved.
Power purchases from the WESM and IPPs respectively made up 12% and 45% of Meralco’s requirement in August.
The company said lower ancillary service charges also cut the transmission charge for the month by P0.0803/kWh. Taxes and other charges rose by P0.0228/kWh.
“Meralco’s distribution, supply, and metering charges, meanwhile, have remained unchanged for 37 months, after these registered reductions in July 2015,” the company said in a statement.
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 grid operator National Grid Corporation of the Philippines.
Taxes and other public policy charges like the feed-in tariff allowance are remitted to the government.
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.
Ahead of the announcement, Meralco hosted a briefing in which Australia-based International Energy Consultants (IEC) said the utility’s average tariff had actually slipped by four percent in January 2018 from the same month in 2016, the last time that the consulting firm released its report.
IEC Director John Morris said an “apples-to-apples” comparison covering the same period using data adjusted to present figures in the same currency, showed that Meralco is now ranked 24^th among 46 markets covered by the study.
“Meralco’s tariffs have decreased significantly versus large increases in almost all other items of household expenditure,” he said.
The average rate for Meralco during the review period was at $0.1537, down four percent from $0.1603 in 2016 and $0.2199 in 2012. No survey was conducted in 2014.
In peso terms, the average rate in 2018 rose by three percent to P7.77/kWh from P7.54/kWh in 2016, but down 18.8% from P9.57/kWh in 2012. The peso’s depreciation against the dollar was the reason for the different price movement from 2016 to 2018.
Mr. Morris said the average price for the markets included in the survey was $0.1361/kWh, but he noted that many of the lowest cost markets have “significant” nuclear generation, which he said “does not generally include the full cost.”
In Asia, the Philippines has ranked higher in terms of power costs but those with lower rates were enjoying subsidies in the form of cash grants, subsidized fuel or deferred expenditure.
If subsidized markets were excluded, then Meralco’s tariff if 10% lower than the average, Mr. Morris said.
For residential customers alone, the local utility’s rate in peso terms at P8.96/kWh ranked second to Japan’s P12.31/kWh. Singapore, Hong Kong and Thailand rounded out the top five with P8.83/kWh, P6.53/kWh and P6.23/kWh, respectively. The same ranking was recorded in 2016, although Mr. Morris did not give the comparative rates.
The other conclusions reported in the IEC survey are:

• Over the past two years, Meralco’s customers have been among the few in the world that have enjoyed rate reductions, versus substantial increases in some neighboring countries.

• Meralco’s average tariff has decreased by four percent since January 2016 versus an average increase of 12% in the survey. In peso terms, Meralco’s tariff has increased by only 13% despite twin headwinds of significant fuel price increases and a depreciating local currency.

• Meralco’s residential customers have experienced a four percent increase in their monthly bills versus a seven percent increase in consumer price index, since 2016. Residential customers now pay eight percent below the global average and now rank 26^th out of 46.

• All of the components of the regulated tariff are judged fair and reasonable, based on comparisons with other markets and versus the true cost of electricity.

“This is an excellent outcome for consumers,” Mr. Morris said, considering that the Luzon power market is unsubsidized and the majority of electricity is produced using imported fuel.
Meralco’s tariff reductions are mainly due to the addition of competitively priced power supply contracts in the generation portfolio.
To ensure that Meralco holds or improves its position relative to tariffs in other markets, it is critical that regulators and legislators focus on facilitating investment in new generation to meet strong demand growth and promote retail competition so that wholesale electricity cost reductions are fully passed on to consumers. — Victor V. Saulon

BUSINESS OPTIMISM in the Philippines slipped last quarter as against the year-ago level, although the country was still second-best in Southeast Asia, according to new research from Grant Thornton.
In its International Business Report (IBR), the firm said optimism in the country’s economy dipped to 81% of respondents from 88% — reflecting “reaction to the external economic environment, the moderate pace of economic growth and the short-term challenges” — though the latest reading was still eight points more than in 2018’s first-quarter.
But among the five covered members of the Association of Southeast Asian Nations (ASEAN), it said the figures “generally reflect the long-term view that the Philippines is on track towards becoming one of the top 20 economies in the world.”
The Philippines’ second-quarter reading was below Indonesia’s 98%, but better than Malaysia’s 52%, Singapore’s 32%, Thailand’s two percent.
Marivic C. Españo, chairperson and chief executive officer at P&A Grant Thornton, said in a statement: “The record levels of optimism… are undoubtedly pushed upwards by the continued growth of China, a close trading partner for many of the region’s economies.
“But what’s really encouraging to see is the greater focus on regional cooperation since the formation of the ASEAN Economic Community in 2015. Closer ties between businesses will provide the future fabric for growth in the region in the years ahead.”
For the Philippines, the local economic outlook and profitability were also significantly higher than the ASEAN averages, the firm said.
It cited “significant improvements” in major constraints to doing business in the Philippines.
“More and more organizations view regulations and red tape as less of a constraint: IBR ratings on red tape have dropped to a six-year low of 20%,” according to the same press release.
“Transport infrastructure is also reported to have greatly improved: views on transport infrastructure as a hindrance to business conduct have decreased to a six-year low of 14%.”
It also said an increasing number of businesses had reported that the lack of skilled workers is no longer a major constraint to doing business. IBR ratings on the lack of skilled workers have dropped by 20 percentage points to 36%.
Moreover, profitability expectations among Filipino businesses increased by 24 percentage points to 80%.
But it said fewer respondents expect to invest in research and development in the next 12 months, with expectations decreasing by 14 percentage points to 48%.
“There are spectacular growth opportunities for domestic and neighboring markets in Asia,” Grant Thornton said. “Demand and production capacities will continue to grow.”
It said 54% of the Filipino senior business executives who responded to the survey said that they intended to expand their business domestically in the next 12 months.
“Manufacturing has seen an upsurge in recent months, as more foreign investors look at the Philippines as a manufacturing hub in the long term,” it said, adding that more businesses expect to invest in plant and machinery at 70%. — Victor V. Saulon