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Lower generation charge pulls Meralco retail rates down by 3% in first half

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The Manila Electric Company (Meralco) saw average power retail rates in the first half of the year drop further by 3 percent on account of lower charges in generation, transmission, and system loss.

In a virtual media briefing held recently, Meralco FVP and Regulatory Management Head, Atty Jose Ronald V. Valles reported that retail rates decreased to P7.92 per kilowatt hour (kWh) from the P8.19/kWh registered in the same period last year.

Lower generation charges—which represented 57 percent of the total retail price—were accounted mostly for the drop.

During the period, generation charges slipped by 1.3 percent to P4.5 per kWh due to the decrease in charges from the Wholesale Electricity Spot Market (WESM), coupled with lower fuel prices, and the peso appreciation.

Average retail rates went in contrast to the higher inflation recorded during the first half of the year.

Based on data by the Philippine Statistics Authority (PSA), inflation in the first six months settled at 4.4 percent, as compared with the 2.5 percent in the same period last year.

Meanwhile, the implementation of transmission over-recoveries refund between January and April 2021 coupled with the lower ancillary service charges dragged transmission charges lower by 7.5 percent to P0.73 per kWh.

Transmission charges made up for 9 percent of the total retail price.

System losses, which accounted for 3 percent of the retail price, were down by 6.8 percent to P0.28 per kWh due to the implementation of system loss over-recoveries refund between January and April, coupled with lower generation and transmission costs.

Distribution charges, on the other hand, inched up by only 0.1 percent as residential sales continued to increase brought about by the imposition of enhanced community quarantine.

Rates were also tempered by Meralco’s continued implementation of the Distribution Rate True-Up refund which began in March 2021.

It can be recalled that the Energy Regulatory Commission (ERC) provisionally approved Meralco’s proposal to refund around P13.9 billion over a period of 24 months or until the amount is fully refunded. This amount represents the difference between the Actual Weighted Average Tariff and the ERC-approved Interim Average Rate for distribution-related charges for the period July 2015 to November 2020.

Subsidies, taxes, and universal charges were lower by 5.8 percent to P0.85 per kWh because of lower effective taxes.

Lastly, FIT-Allowance, which is only 1 percent of the retail rate, increased by 60.5 percent as a result of the implementation of higher FIT-All rate starting January 2021 to P0.0983 per kWh from P0.0495

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