POWER spot market prices and a reduction in charges from Independent Power Producers (IPPs) resulted in a decrease of P0.2055 per kilowatt hour (kWh) in overall power rates this month for residential consumers of the Manila Electric Co. (Meralco).
From last month’s P8.6966 per kWh, August power rates are now down to P8.4911 per kWh. This is equivalent to a reduction of around P41 in the total bill of residential customers consuming 200 kWh.
The drop was traced to lower generation charges, which have declined for five consecutive months. Meralco said this month’s overall rate is significantly lower than that of August 2019, which was P9.5674 per kWh, and is also the lowest in nearly three years, since September 2017.
From P4.3344 per kWh in July, the generation charge decreased by P0.2103 per kWh to P4.1241 per kWh this August.
Meralco said lower rates from the Wholesale Electricity Spot Market (WESM) and the IPPs mainly caused this. The share of WESM to Meralco’s supply needs is 15.5 percent. IPPs, on the other hand, accounted for 33.9 percent of Meralco’s total supply.
WESM charges were P1.1200 per kWh lower this month due to improved supply situation in the Luzon grid with lower average plant capacity on outage. There were also no Yellow Alerts in July versus one alert in June.
Cost of power from the IPPs decreased by P0.3284 per kWh due to lower natural gas prices as a result of quarterly repricing. The price of natural gas from Malampaya is indexed to international crude oil prices. The significant reduction in crude oil prices in the first half of the year was reflected in the Malampaya natural gas price this month. Peso appreciation also contributed to this month’s reduction in IPP rates.
Meanwhile, purchases from PSAs inched up by P0.2722 per kWh due to lower average plant dispatch and lower Force Majeure (FM) claims this month, compared with the previous month.
Because of the reduced power demand in its service area during the community quarantine period, Meralco continued to invoke the FM provision in its PSA with First Gen Hydro Power Corporation (FGHPC). This August, the FM claim reached a total of about P82 million, equivalent to customer savings of P0.0285 per kWh in the generation charge. For the past five months, the savings from FM claims reached around P1.9 billion.
PSAs accounted for 50.6 percent of Meralco’s total supply.
During a virtual press briefing Tuesday, Meralco utility economics head Lawrence Fernandez said electricity demand started recovering in June and July, albeit not as strong as the same months a year ago.
“At the start of the community quarantine, we saw a sudden reduction in demand. But this gradually went up in June and July but still very much below 2019 level. The reduction from June 2019 to June 2020 was a little more than 6 percent,” explained Fernandez.
Transmission charge for residential customers registered a slight reduction of P0.0081 per kWh due to lower ancillary service charges. This more than offsets the P0.0129 per kWh net increase in taxes and other charges.
Collection of the Universal Charge-Environmental Charge amounting to P0.0025 per kWh remains suspended, as directed by the ERC.
Meralco’s distribution, supply, and metering charges, meanwhile, have remained unchanged for 61 months, after these registered reductions in July 2015.
Image credits: (Bloomberg)