Electricity rates seen to rise in February

Coming from a seven-year low overall rate of P8.09 per kilowatt hour (kWh) in January 2017, Manila Electric Co. (Meralco) announced that there will be an increase in the rate for a typical household this February of P0.92 per kWh, bringing the overall rate to P9.00 per kWh.

This would bring the running average overall residential rate for 2017 to P8.55 per kWh. This is P2.17 per kWh lower than the 2014 average rate of P10.72 per kWh, and P0.89 per kWh lower than the 2015 average rate of P9.44 per kWh. This also approximates the 2016 average of P8.50 per kWh.

The increase this month is mainly due to the upward movement in the generation charge.

January 2017’s record low generation charge (since October 2004) of P3.70 per kWh was largely due to a reduction in capacity fees arising from the annual reconciliation of outage allowances that is done at the end of each year, under the contracts approved by the Energy Regulatory Commission (ERC).

READ: Electricity rates go down in January

The reduction in capacity fees every January represents savings immediately passed on to consumers by way of lower electricity rates.

The capacity fees, particularly of Pagbilao and Ilijan, returned to normal levels this February, pushing up the generation charge by P0.62 per kWh higher to P4.32 per kWh.

Contributing to the adjustment was the lower dispatch of power service agreements (PSAs) and independent power producers (IPPs) due to a variety of scheduled and forced outages. Calaca, Masinloc, Quezon Power and First Gas-Sta. Rita underwent scheduled shutdowns, while the Ilijan power plant was isolated by transmission line troubles due to Typhoon “Nina.”

Demand in January 2017 was also about 400 MW lower compared to the December 2016 level.

The remainder of the increase in the generation charge was due to higher fuel prices, partially from the quarterly repricing of Malampaya natural gas, and a slight depreciation of the peso vis-à-vis the US dollar. The share of PSAs this month stood at 38.6 percent, while the share of IPPs was at 38.1 percent.

Overall charges from the Wholesale Electricity Spot Market (WESM) decreased by P0.25 per kWh in January 2017, mitigating further increases in the generation charge. The share of WESM purchases to Meralco’s total requirements went up from 21.8 percent to 23.2 percent.

This month, there was an increase in the transmission charge of residential customers by P0.15 per kWh due to the increase in power delivery service charges caused by National Grid Corporation of the Philippines’ implementation of higher Interim Maximum Allowable Revenue (iMAR). Higher Ancillary Service Charges also contributed to the increase in the transmission charge. RAM