Meralco may raise rates by 50¢ due to higher spot market prices

Manila Electric Co. (Meralco) may have to brace for a 50-centavo per kilowatthour (kwh) increase in their electricity bills due to the continuing rise in power spot market prices.

Based on a preliminary report from the Philippine Electricity Market Corp. (PEMC), spot prices at the country’s wholesale electricity spot market (WESM) have increased to P8 per kwh in April from P5.936 per kwh in March.

Based on Meralco’s computations, the drastic rise in WESM prices could lead to an additional 50 centavos per kwh for last month’s billings. In April, Meralco reportedly traded 25 percent of its power requirements at the WESM.

The PEMC had earlier said spot market prices are seen to significantly rise due to the increased utilization of the more expensive oil-based power plants with coal plants reportedly running out of fuel, thus, were not able to run at maximum loads.

The preliminary settlement price was the initial value sent to WESM customers. The traded volumes stood at 540 million kwh amounting to P4.4 billion for the March 26 to April 25 billing cycle.

In an advisory sent to media by the WESM, the load weighted average price (LWAP) for March 26 to April 25 billing was placed at P7.337 per kwh from P4.923 per kwh the previous month.

Since there are adjustments to be made to arrive at the effective settlement price, the final rate billed to the spot market customers is seen reading over P8 per kwh. 

The impact on the rise of prices at the WESM, however, will not be immediately reflected in the customers’ billings due to a regulatory lag period.

An earlier Supreme Court ruling ordered the Energy Regulatory Commission (ERC) to conduct a series of public consultations and necessary publications before it approves a rate adjustment applied by distribution utilities like Meralco.

According to WESM data, the marginal plants (or the facilities setting price trends) especially during peak hours, were either the oil-fired plants owned by state-run National Power Corp. (Napocor) or its contracted independent power producers (IPPs) traded in the spot market by the Power Sector Assets and Liabilities Management Corp. (PSALM).

The data showed that the highest clearing price was registered by Napocor-run Limay B power plant which hit as high as P20 per kwh. 

The others were Subic Enron with prices ranging from P5.094 to P9.60 per kwh; Bauang Private Power at P5.147 to P9 per kWh; and Malaya at P7 to P8.50 per kwh. All three are contracted IPPs of the state-run power firm.

Meanwhile, the Ilijan natural gas-fired power plant, also a Napocor IPP, registered high clearing prices during peak hours ranging from P2.01 to P9.501 per kwh.

The peak hours are from 9 a.m. to 9 p.m.; while off-peak periods are from 1 a.m. to 8 a.m. and 10 p.m. to 12 midnight. 

The settlement price for April was the second highest recorded at WESM since it started operations in June last year. The highest price was in November when the effective settlement price hit P10.15 per kwh during the scheduled shutdown of Malampaya gas facilities.

PSALM has been subjected to an investigation last year for an alleged price manipulation at the electricity spot market.  The asset management firm is still being investigated by the ERC for the same allegation that it engaged in "price fixing" last August when the settlement price hit P8.086 per kWh.

Distribution utilities like Meralco are mandated under the Electric Power Industry Reform Act (EPIRA) to buy or trade at least 10 percent of their supply requirement from the WESM. 

PSALM, an entity created by the EPIRA to handle the finances and privatization of Napocor assets, and Napocor accounts for more than 50 percent of the WESM volume.