Meralco expects surge in April generation charge as spot prices spike

MANILA, Philippines - Manila Electric Co. (Meralco), the country’s biggest power distributor, said its generation charge in April may go up due to higher prices at the spot market in March.

However, Meralco did not provide any estimate yet on the April generation charge.

“We noted an increase in demand from February to Mach of around 100 megawatts coupled with the outages of some large power plants, e.g. one unit of Ilijan. We expect that there was upward pressure on spot market prices in March which may affect the generation charge in April,” said Larry Fernandez, head of Meralco’s utility economics.

In March, electricity consumers experienced a 45-centavo per kilowatt-hour reduction in rates on the back of lower power costs in February. The adjustment translated to a P90 reduction in the bill of a typical household using 200 kwh.

The lower electricity rates in March stems from a 33-centavo per kwh decrease in the generation charge to P5.21 per kwh in March from P5.54 per kwh in February, marking the second straight month of reductions.

This is also in contrast to the December and January generation charge of P9.10 per kwh and P10.23 per kwh, respectively.

This developed as Meralco said yesterday that it has filed an application before the Energy Regulatory Commission (ERC) for the adjustment of its maximum average price (MAP) for regulatory year (RY) 2015 and its translation into distribution, supply and metering charges to different customer classes.

The so-called MAP is allowed under the ERC’s rules for performance-based regulation (PBR), under which  the ERC reviews and verifies the rates of all private distribution utilities each year, considering such factors as their performance against technical and customer service standards.

Under the PBR method, annual revenue requirement, resulting indicative prices, and performance incentives have been approved before the start of the regulatory period from July 2011 to June 2015.

In its filing, Meralco said the MAP for RY 2015 decreased to P1.5562 per kwh from P1.6474 per kwh or a reduction of P0.0912 per kwh.

If approved, the different customer classes will experience around five to six percent reduction in their Meralco (distribution, supply, metering) charges.

Thus, a residential customer consuming 200 kwh will have a combined 15-centavo per kwh reduction in its Meralco charges to P2.20 per kwh from P2.35 per kwh or a reduction of six percent of what he currently pays.

“Implementation of the lower rates will be at the start of Meralco’s fourth regulatory year in July 2014,” Meralco said in its advisory.