Meralco slashes Oct. power rates

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CUSTOMERS of Manila Electric Co. (Meralco) will pay less for the generation and transmission charge components of their power bills for the third straight month this October.

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Meralco, the country’s largest power distributor, on Thursday announced that the rate for a typical household will be lower this October by P0.1216 per kilowatt-hour to P8.34 per kWh.

The reduction translates to around P24 in the electricity bill of a household with monthly consumption of 200 kWh.

It is the result of downward movements in both generation and transmission charges.

This month’s overall rate is lower by P0.08 per kWh compared to P8.42 per kWh in October 2015.

The decrease is the third straight month of reduction in the overall residential rate.

This month, there was a drop in the generation charge–P0.0501 per kWh lower than last month’s P3.9439 per kWh.

At P3.8938 per kWh, the generation charge is P0.1017 per kWh lower compared to P3.9955 per kWh in October 2015.

The decrease resulted mainly from lower charges from the Wholesale Electricity Spot Market (WESM) because of lower demand in September as compared to August.

It offset increases in costs from Independent Power Producers (IPPs) and Power Supply Agreement (PSAs) brought about by higher coal prices and the weaker peso against the US dollar, from P46.58 to P48.50.

Peso depreciation has an upward impact on the peso conversion of the dollar charges of the PSA and IPP plants.

Overall charges from the WESM decreased by P1.4747 per kWh.

Spot prices softened as peak demand in the Luzon grid was lower by around 300 MW in September compared to August.

The share of WESM purchases to Meralco’s total requirements decreased from 20.6 percent to 16.1 percent.
Meanwhile, the cost of power sourced from plants under the PSAs increased by P0.3257 per kWh primarily because of higher fuel costs.

Coal price in the region continued to increase from $52.85 per metric ton in June 2016 to $67.41 per MTin August 2016.

The share of PSAs stood at 47.4 percent.

Cost of power from the IPPs also increased by P0.1671 per kWh as a result of the peso weakening against the US dollar.

The share of the IPPs to Meralco’s total requirements for the September supply month was at 36.3 percent.
There was also a decrease in the transmission charge by P0.0558 per kWh, mainly because of reduction in National Grid Corporation of the Philippines (NGCP) ancillary charges.

Taxes and other charges also decreased by a combined amount of around P0.0157 per kWh.

Meralco’s distribution, supply and metering charges, meanwhile, have remained unchanged for 15 months, after these registered reductions in July 2015.

The utility reiterated that it does not earn from the pass-through charges, such as the generation and transmission charges.

Payment for the generation charge goes to the power suppliers, while payment for the transmission charge goes to the NGCP.

Drop in rates since 2012 has narrowed gaps between Meralco’s rates and those in other countries

The downward rate adjustment this month came on the heels of a survey released last week by the International Energy Consultants (IEC), an Australia-based consulting firm specializing in Asian power markets.

The IEC study showed that Meralco’s average tariff (excluding value-added tax) has declined 28 percent since January 2012 against an average decline of 19 percent across 44 countries covered by the survey.

In local currency terms, this translates to a 22-percent decrease in the power utility’s average tariff versus an average decline of only one percent across all markets.

IEC Managing Director Dr. John Morris, who led the study, said Meralco’s rates and those in select markets in the Indo-Pacific region and other parts of the world are now at closer parity than before.

Meralco’s average electricity tariff is only 11 percent above the survey’s average rate, which reflects an improvement from a similar survey done by the IEC in 2012 that showed electricity rates in the Meralco area being 24 percent above the average rate of countries surveyed in that year.

“This is an excellent outcome for consumers,” Morris said, “considering that the Luzon power market is unsubsidized and the majority of electricity is produced using imported fuel.”

Morris noted the role that government subsidies continued to play to make power rates artificially low in markets like Thailand, Indonesia, Malaysia, South Korea and Taiwan.

He estimated that subsidies in those countries amounted to almost $50 billion in 2015 alone.

During the period under study, the IEC found that lower fuel costs, mainly coal, was a major contributor to the lower power prices in 2016.

The IEC, however, added that the power utility’s sourcing strategy, a lower distribution charge and lower system loss were also major contributors to the decline.

Because of these factors alone, Morris said, Meralco customers were able to save around P30 billion in power costs.

Since 2012, Meralco has been aggressively negotiating competitively priced PSAs with new suppliers.

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