Meralco hikes power rate

ELECTRICITY rates of distribution giant-Manila Electric Company (Meralco) will increase by 56 centavos per kilowatt hour (kWh) this month after its generation charges went up by P1 per kWh.

Ivanna dela Pena, Meralco's first vice president and head of utility and economics, attributed the price hike to the higher cost of power being sourced from the wholesale electricity spot market (WESM) and the independent power producers (IPPs).

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“Consumers have to brace for higher power rates this year as we do not see a repeat of the conditions that brought about the low power rates last year. In fact, all signals point to the opposite direction,” de la Pena said.

Aside from price increment at the spot market and IPPs, dela Pena said another factor that aggravated the situation is the entry of the dry season resulting to lower water levels for the hydro plants and the impending one month shutdown of the Camago-Malampaya starting February 10 until March 11.

“Rains were abundant last year, resulting in sufficient levels of hydro generation. El Nino is expected to bring the dams to critical levels and would cause temperatures to rise, fuelling higher demand,” she said.

Cost of power supplied by the IPPs, state-run National Power Corp., (Napocor) and that sourced from WESM all registered significant increases this January, triggering a sharp P1.00 per kWh increase in the generation charge, the official explained.

From P3.9175 per kWh in January generation charge climbed P4.9303 per kWh this month.

“For most part of last year, demand was down because of the global economic slowdown. This year, the economy is expected to rebound, putting upward pressure on electricity use,” dela Pena said.

This means that customers consuming 100 kWh per see their bill increasing by P56 and those using 200kWh will have an increment of P112.

The higher cost of generation in January is due to a number of factors, dela Pena noted.

Under Napocor's Time-of-Use (TOU) rates, the cost of power from January to June (dry season) is higher compared to that from July to December (wet season).

The First Gas plants also started using gas which is priced higher to reflect world oil prices from July to December 2009.

In December, these plants fully ran on much cheaper banked gas as this was priced at lower levels prevailing in 2002 and 2003.

On the other hand, the higher cost of power from the WESM shows the tightness in generation capacity experienced recently, and also includes recovery of deferred adjustments.

“After nine months of continuous declines in the cost of power resulting to a cumulative drop in the generation charge of P1.10 per kWh, consumers have to be ready now for a period of higher power rates,” Meralco said in a statement.

However, dela Pena said the P1 price adjustment had been tempered with the suspension of the performance-based rate (PBR) as well as the completion of the collection of their P8.8 billion generation charges under recoveries.

“Our recent suspension of the performance based rate adjustment will temper the increase in the generation charge by an average 26.9 centavos per kWh. Also, since Meralco already completed its amortized collection of P8.8 billion in generation charge under-recoveries last month, the billing component ‘Previous Months Adjustment on Generation Cost’ under Generation will be reduced by 16.62 centavos per kWh. These two developments which will be reflected starting Meralco’s February billing will cushion the impact of the generation charge increase by around 44 centavos per kWh,” she said.

Last February 1, the Energy Regulatory Commission granted Meralco's motion for the voluntary deferment of its application of its distribution rate structure.

ERC's decision was in response to the Motion for Reconsideration (MR) filed by intervener Engineer Robert Mallillin on behalf of industrial customers who alleged that industrial customers are being prejudiced in favor of residential customers and asked for a revision of the rate structures of Meralco.

Meanwhile, Meralco external communications head Joe Zaldarriaga stressed that the cost of generation is the result of the interplay of a number of factors beyond the control of the distribution utility.

“The generation charge is a pass-through charge which means Meralco does not benefit from any increase in the generation charge as these are fully paid to the company’s suppliers of power such as Napocor and the independent power producers. We also would like to emphasize that the generation charge may go up or down depending on the cost of the energy that Meralco purchases from said suppliers,” Zaldarriaga said. (MSN/Sunnex)