POWER retailer Manila Electric Company (Meralco) said generation charge will increase by 44 centavos this month due to higher cost from the wholesale electricity spot market (WESM).

According to Meralco, the generation charge for August was placed at P5.6546 per kwh (kilowatt hour) as compared to the July's P6.0962 per kwh.

This month's generation charge is second highest for the year, but 67 centavos lower than the peak level of P6.77 per kwh registered in April.

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The 44 centavos adjustment in the generation charge translates to an increase of around 4 percent from the average July 2010 Meralco bill.

For lifeline residential customers or those consuming 100 kwhs or less, the increase is much less at an average 22 centavos per kwh.

Lifeline customers number to 1.9 million (around 40 percent of Meralco residential customers) and enjoy discounts ranging from 20 percent to 100 percent depending on their monthly kwh consumption.

The generation charge for August 2010 is based on suppliers' billings for July

2010.

Meralco said the effective cost of purchases from the WESM increased by P3.08 per kwh, from P7.90 per kwh in June to almost P11 per kwh in July.

Of the P3.08 per kwh increase, P1.46 per kwh was contributed by higher market clearing prices, P0.85 per kwh due to increase in line rental cost, and the remaining P0.77 per kwh due to various adjustments pertaining to June 2010 WESM supply.

Meanwhile, the company said the lower cost of supply from National Power Corp. (Napocor) provided a tempering effect to the high cost of WESM purchases. The effective NPC rate went down by 63 centavos, from P5.59 in June to P4.96 per kwh in July.

Likewise, the average rate of the IPPs (independent power producers) slightly increased by 7.7 centavos, with reductions in the cost of generation from Sta. Rita and San Lorenzo, at 13 centavos and 29 centavos, respectively, mitigating the P1.26 per kwh increase in the cost of Quezon Power, following the plant's lower dispatch in July.

The natural gas plants were Meralco's cheapest suppliers at rates of P4.51 per kwh for Sta. Rita and P4.46 per kwh for San Lorenzo.

Meralco meanwhile said that with the onset of the rainy season, the availability of the hydro plants will improve. This, hopefully, will result to an easing of prices in the WESM, which had remained high since February 2010.

Movements in the generation charge have closely followed the movement of prices in the WESM. (MSN/Sunnex)