The Manila Electric Company (Meralco) announced today a decrease of P0.7961 per kWh in the December electricity rate, bringing the overall rate for a typical household to P11.2584 per kWh this month from P12.0545 per kWh in November.
For residential customers consuming 200 kWh, the adjustment is equivalent to a decrease of around P159 in their total electricity bill.
This month’s reduction was able to more than offset the increases implemented in the past two months.
Lower generation charge pulled down overall rate
Generation charge for December went down by P0.6606 to P6.5332 from P7.1938 per kWh last month due to lower charges from the Wholesale Electricity Spot Market (WESM) and Independent Power Producers (IPPs).
WESM charges decreased by P2.7624 per kWh with the improved supply situation in the Luzon grid as demand went down by around 421 MW and average plant capacity on outage decreased by about 679 MW. Lower spot market prices avoided the imposition of the secondary price cap in November.
Charges from IPPs, meanwhile, went down by P0.4731 per kWh due to First Gas plants’ reduced use of more expensive liquid fuel and lower international coal prices. Also contributing to this was the Peso appreciation, which affected around 97% of IPP costs that were dollar denominated.
On the other hand, there was a slight upward adjustment of P0.0805 per kWh in charges from Power Supply Agreements (PSA), owing to lower average PSA dispatch.
WESM, IPPs and PSAs accounted for 20%, 32%, and 48%, respectively, of Meralco’s total energy requirement for the period.
Other charges also registered decreases
Transmission charge, taxes, and other charges also registered a net reduction of P0.1355 per kWh.
The collection of the Feed-In Tariff Allowance (FIT-All), at the rate of P0.0364 per kWh, remains suspended as directed by the Energy Regulatory Commission. Pass-through charges for generation and transmission are paid by Meralco to the power suppliers and the grid operator, respectively, while taxes, universal charges, and FIT-All are all remitted to the government.
Meralco’s distribution charge, meanwhile, has not moved since the P0.0360 per kWh reduction for a typical residential customer beginning August 2022.
Meralco rates are fair and reasonable, says International Energy Consultants
Meralco’s rates remain fair and reasonable, according to a study conducted by the International Energy Consultants (IEC).
In its cross-country comparison of 46 energy markets, including two American states, the IEC said Meralco’s average tariff in 2022 ranked 21st and 3% below the global average. It added that if subsidized markets were excluded, the power distributor’s tariff would even be 13% lower than the world average.
The study also emphasized that electricity tariffs of the Philippines’ neighbor countries, particularly Thailand, Indonesia, Malaysia, Korea, Taiwan and Vietnam, are more than 50% subsidized.
The IEC study further showed that over the past five years, Meralco’s tariff increased by 24%—about the same level of 23% increase globally—due to higher generation charge, a pass-through cost, which in turn was a result of fuel price increases particularly imported coal and domestic gas.
“Notwithstanding this increase, all of the components of the regulated tariff are judged fair and reasonable by IEC, based on comparisons with other markets versus the underlying cost of electricity supply in Luzon,” IEC said.
“Considering that the Luzon power market is unsubsidized, and the majority of the electricity is produced using imported fuel, Meralco appears to have done a very good job of minimizing tariff increases,” it added.
IEC also recognized that of the tariff components, the Meralco’s distribution charge only increased by 2% and the generation charge, while significant, was still relatively lower mainly due to Meralco’s ability to source low-cost power supply agreements.
In its recommendation, the IEC cited that it is critical to focus on facilitating investment in new generation capacities to meet demand growth. It added that given the country’s reliance on imported fuel, urgent attention should be given in accelerating the development of indigenous renewable energy sources.#