Meralco hikes rates by 30¢

MANILA, Philippines – The Manila Electric Co. (Meralco) will increase power rates by 30 centavos per kilowatt-hour (kWh) this month.

Meralco vice president for utility economics Ivanna de la Peña attributed the rate increase to the rise in the cost of natural gas which is part of the generation mix of Meralco.

De la Peña explained that the cost of natural gas alone accounted for 75 percent of the billings to Meralco of the First Gas Corp. power plants, which supplied 40 percent of Meralco’s requirements in October 2008.

Meralco gets other power requirements from First Gas’ San Lorenzo and Sta. Rita natural gas-fired power facilities in Batangas.

De la Peña assured Meralco customers that the increase in generation charge would only be temporary.

“This is a temporary situation as starting this month and until the end of the year, the power plants will be using banked gas which is 40 percent cheaper than the current price,” she said.

She said the cost of natural gas moves with the preceding six months’ average basket of fuel prices specified in the contract with the Gas Sellers.

“The cost of natural gas for October 2008 was set using average prices from April to September 2008, which include peak levels in May to July 2008. Because of the lag, the significant reductions in world oil prices this quarter will only be reflected in gas prices in January,” she added.

Assuming October dispatch will be replicated in November and December, consumption of the expensive gas will be limited to the first three weeks of the November supply month. After that, the much cheaper banked gas will be used.

“Banked gas is that (gas) which was not consumed in 2002 to 2003 and thus is priced much lower,” De la Peña said. “With the cost of gas a direct pass-through, a tempering of the generation charge is expected in the next two months.”

De la Peña also said a substantial portion – estimated at 55 percent – of the cost of natural gas is payment of royalties to the national government.

At current prices, the royalty share amounts to over P2.60 per kWh.

Business groups led by the National Competitiveness Council, the Philippine Chamber of Commerce and Industries (PCCI), the Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) have long advocated the reduction of this royalty and the use of its proceeds to lower power rates.

On the average, the rate of the IPPs increased by 39 centavos per kWh in October.

Quezon Power’s 89 percent dispatch significantly reduced its effective rate, partially cushioning the impact of the higher gas prices.   

The cost of supply from WESM in October was still computed at National Power Corp.-time of use (TOU) rates.

The effective WESM rate was 86 centavos lower than the level in September, which included the cost of line rental for August. 

With the higher off-take during peak hours, Napocor’s effective rate increased by 24 centavos per kWh. 

Napocor is Meralco’s lowest-cost supplier, as it continues to return centavos in GRAM (generation rate adjustment mechanism)/ICERA (incremental currency exchange rate adjustment) over-collections for July to December 2006 while its basic rate adjustment application remains pending at ERC.

Meralco vice president for corporate communications Elpi Cuna Jr., for his part, reiterated that the adjustment in generation cost is revenue-neutral for Meralco.

“We would like to reiterate that Meralco does not earn a single centavo from the adjustments in the cost of power supplied to Meralco. However, addressing the issue on the removal of the royalties imposed on indigenous fuel supply such as natural gas or using its proceeds to lower power rates will be very much welcomed by consumers since this will definitely redound to lower electric bills,” Cuna said.

Cuna, however, said lifeline consumers would be partly shielded from the increase because they enjoy discounts of 50 percent, 35 percent, and 25 percent on their monthly bills.

“It also helps that electricity consumption during these cooler months is much lower,” he said.

Cuna added: “We would like to reiterate that the increase is only temporary. Meralco is always cognizant of the need to ensure that consumer interest is addressed and that all means are adopted in order to mitigate any adjustment in the price of electricity.”