February electricity rates rise by p0.92/kWh

Coming from a 7-year low overall rate of P8.09 a kilowatt hour (kWh) in January 2017, Meralco announced that there would be an increase in the rate for a typical household this February 2017 of P0.92 a kWh, bringing the overall rate to P9 a kWh.

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

The increase this month is mainly due to higher generation charge.

January 2017’s record low generation charge (since October 2004) of P3.70 a 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).

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 a kWh higher to P4.32 a 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 against the dollar. The share of PSAs this month stood at 38.6 percent while the share of IPPs was 38.1 percent.

Overall charges from the Wholesale Electricity Spot Market (WESM) decreased by P0.25 a 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.