Power rates likely to increase in May with completion of pass-through charges refund — Meralco

Power consumers may experience higher power rates in May with the completion of the refund of pass-through charges, coupled with the increase in Wholesale Electricity Spot Market rate, Manila Electric Co. said over the weekend.

“Overall, there may be an increase in the May power rate as the refund of pass-through charges that started in January 2021 was completed in April and the corresponding deduction will no longer appear beginning the May bill,” Meralco vice president and head of utility economics Lawrence Fernandez said.

The Energy Regulatory Commission, in a decision on Dec. 29, 2020, directed Meralco to refund over-recoveries in transmission and other pass-through charges over a period of around three months or until the amount is fully refunded.

“For a residential customer, the refund was equivalent to around P0.15 per kWh. Meralco implemented the ERC-approved adjustments starting January 2021 and completed the refund in April,” Fernandez said.

He said Meralco was still waiting for the final bills from power suppliers but based on initial projections, “there may be an upward pressure on the generation charge for the month of May” due to observed increase in WESM prices.

The WESM is the country’s trading floor of electricity. Historically, WESM prices go up during the dry months because of high demand and the lower generation capacity from hydro power plants. WESM charges also go up with more power plants on outage, resulting in thin power reserves.

“Despite the re-imposition of ECQ in NCR Plus, power situation in the grid remained tight as capacity on outage is remained above 3,300 megawatts and Luzon peak demand in April still exceeded 10,400 MW,” Fernandez said.

“We also expect an increase in Malampaya natural gas prices due to the quarterly repricing, which will reflect the upward trend in Dubai crude oil prices beginning October 2020,” he said.

Meanwhile, Meralco asked the Department of Energy for exemption from the competitive selection process and extend its power supply agreement with Masinloc Power Partners Co. Ltd. to secure its power supply amid the forecasted thin reserves until August.

National Grid Corp. of the Philippines forecast thin operating margins in the Luzon grid from April to August because of multiple power plants on extended outage.

Meralco head of regulatory management Jose Ronald Valles said the NGCP forecast was aligned with the company’s forecast which showed upcoming scheduled outages of both power plants and the Spex-Malampaya pipeline. This may be aggravated by forced outages of power plants and gas supply restrictions.

Meralco said the supply forecast, together with increased demand and needed reliability during the dry months and the upcoming elections prompted it to renegotiate and amend its 2019 agreement with MPPCL to extend the term of its power supply agreement.

“Our own forecast shows we only need around 200 MW, and we are working on a 220 to 250-MW allowance and that will give is additional capacity for up to one year from May 26 to cover the election period as well by next year,” Valles said.

“We think that will be enough for us in the meantime,” he said.

Topics: power rates , Wholesale Electricity Spot Market , WESM , Manila Electric Co. , Meralco , Energy Regulatory Commission , ERC
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