Electricity rates up on high summer demand

MANILA, Philippines - After two consecutive months of reduction, electricity rates rose this month by 89 centavos per kilowatt-hour (kwh) due to tight supply brought about by the shutdown of some power plants and the surge in demand from consumers with the onset of the summer season.

The adjustment translates to an increase of P178 in the electricity bills of the average household consuming 200 kwh.

In an advisory yesterday, the Manila Electric Co. (Meralco), the country’s biggest power distributor, said April generation charge rose by 69 centavos per kwh to P5.90 per kwh from P5.21 per kwh in March. Generation charge refers to the cost of power sold by power producers to distribution utilities. It accounts for roughly 60 percent of the total electricity bill.

Meralco said demand last March increased by 200 megawatts or roughly the equivalent of the consumption of 10 large malls.

Meralco also attributed the increase in generation charge to higher prices at the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity.

WESM prices rose to P21.59 per kwh during the March supply month from the pervious month’s P4.90 per kwh or an increase of P16.69 per kwh.

“Though demand for the March supply month increased, Meralco only obtained about four percent of its power requirements from WESM,” the advisory read.

“With Meralco’s purchase from the WESM the previous month being at around the same level, WESM rates, therefore, increased because of higher prices at the market,” Meralco said.

Power supply agreements (PSA) and independent power producers (IPP) account respectively for 51 percent and 45 percent of Meralco’s power requirements.

A 20-centavo per kwh increase in the average cost of power sourced from the PSAs was mostly offset by a 19-centavo per kwh reduction in the rates of the IPPs.

Power from PSAs increased to P4.77 per kwh from P4.57 per kwh, while IPP rates went down to P5.44 per kwh from P5.63 per kwh.

Aside from the increase in the generation charge, transmission charge and taxes also went up by P0.03 and P0.11 per kwh, respectively, Meralco said.

“Transmission charge increased mostly due to the increase in ancillary charges. Slight increase in power delivery service also contributed to the increase in transmission cost. These increases in the generation and transmission charges impacted on taxes, as these charges are factored in the computation of taxes,” Meralco said.

The power firm also said it is threshing out measures to help mitigate the adverse impact of the tight power supply.

Meralco recently signed power supply agreements with various power suppliers to address the supply situation and lessen exposure to the WESM during the period.

These include the contract with 1590 Energy Corp. for the purchase of up to 140 MW capacity of 1590’s Bauang Power Plant.

Another contract is with Global Business Power (GBP) for the purchase of up to 64 MW capacity output from GBP’s Toledo Power Co. and Panay Power Corp. both of which started supplying to Meralco last April 3.

Meralco also urged customers to observe energy efficiency practices especially this summer by turning off lights and unplugging appliances when not in use.

Meralco reiterated that it does not earn from the pass-through charges, such as the generation charge, the single largest component of the electricity bill.

“Meralco’s distribution, supply and metering charges account for only about 18 percent on the average of the total electricity bill,” it said, adding that the firm’s distribution charge has not changed since last year.