Meralco rates may go up this month

Following a slight reduction last month, electricity rates of Manila Electric Co. (Meralco) are likely to go up this month due to higher generation charge.

Higher average electricity spot market prices for the February billing period is seen as the major driver of the potential increase in Meralco's rates this month, according to an official of the power distributor.

'To recall, the generation charge reduction in February was largely due to two factors. One, there was minimal use of expensive alternative fuel by the First Gas plants. Two, the supply situation improved so that the secondary price cap was not triggered for an entire month, the first time this happened since October 2021,' Meralco vice president and head of utility economics department Lawrence Fernandez told The STAR over the weekend.

'For the March 2023 generation charge, both factors are no longer present,' he said.

With demand increasing, Fernandez said wholesale electricity spot market or WESM prices rose, resulting in the secondary price cap being triggered once more.

'Thus, we can expect an increase in the March 2023 generation charge,' he said.

The generation charge accounts for more than half of the electric rate.

It is a pass-through charge which is paid to the power suppliers, and Meralco only earns from distribution, supply, and metering charges.

Meralco's generation costs are usually influenced by the exchange rate, the supply-demand situation and its effect on WESM prices, and international fuel prices.

The Independent Electricity Market Operator of the Philippines (IEMOP) said last month that average electricity spot market prices are seen rising for February on the back of an expected lower supply margin.

IEMOP said WESM prices rose to P7.43 per kilowatt-hour (kWh) in the first few days of the February billing period.

It was projected to increase to P7.55 per kWh for the rest of February, higher than January's average of P5.76 per kWh.

Due to lower generation charge, Meralco rates went down slightly by P0.0106 per kWh to P10.8895 per kWh in February, ending three consecutive months of increases.

Meralco earlier said that once the summer months kick in, demand usually starts to rise, putting an upward pressure on prices.

Meralco is the largest electric power distribution company and the biggest private sector utility in the country.

The company provides electric service within its franchise coverage and has a consolidated customer count of 7.6 million as of end 2022.