It could've been higher.
The Manila Electric Company (Meralco) deferred collecting nearly P500 million in generation costs until September this year, resulting in an upward adjustment of P0.6436 per kWh in the electricity rate this June instead of P0.7736 per kWh.
"The increase in the generation charge this month would have been higher, but Meralco took the initiative to cushion the impact of the higher pass-through costs to our customers with the help from some of our suppliers, which deferred the collection of portions of their generation costs," Meralco senior vice president and head of Regulatory Management Office Atty. Jose Ronald V. Valles said.
The rate adjustment will bring the overall rate for a typical household to P12.0575 per kWh, up from P11.4139 per kWh in the previous month.
Meralco added that the adjustment is equivalent to an increase of around P129 in the total electricity bill for residential customers consuming 200 kWh.
Higher generation charge
In a press conference, Meralco spokesperson and vice president for Corporate Communications Joe Zaldarriaga said the rate increase was driven by the generation charge, which went up by P0.3466 per kWh mainly due to higher costs from the Wholesale Electricity Spot Market (WESM).
However, the generation charge might soften next month with the arrival of the rainy season, which would lower energy demand and the approval by the Energy Regulatory Corporation (ERC) of the 910 megawatts (MW) power deal between Meralco and the San Miguel-subsidiary South Premier Power Corporation.
The power supply agreement will protect Meralco's consumers from exposure to volatile prices in the Wholesale Electricity Spot Market (WESM).
Zaldarriaga said, "Consumption plays a vital role on the demand side. The high head index pushes power demand up. The Luzon grid was placed under yellow alerts several times during the summer months, and we had to buy power from the spot market."
"Hopefully, with the improving weather, the demand will lower and we will have additional supply from our power supply agreement (PSA)," he added.
Deferred generation costs
Meralco, along with Quezon Power (Philippines) Ltd., San Buenaventura Power Ltd. Co. (SBPL), and South Premiere Power Corporation (SPPC), deferred collecting around P500 million in generation costs, lowering this month's generation charge by P0.1313 per kWh. As cleared by the ERC, this will instead be billed on a staggered basis over the next three months.
"We are still waiting for regulatory approval of our 400-MW interim PSA with Limay Power, Inc. which could significantly reduce our WESM exposure and generation costs," Valles added.
For this month's billing, WESM charges were higher by P1.5203 per kWh due to tight supply conditions in May, as average demand increased by more than 1,200 MW. The Luzon Grid was on Yellow Alert for 12 days and was on Red Alert last May 23. In addition, the persistently high spot market prices triggered the imposition of the secondary price cap 19% of the time.
Charges from Independent Power Producers (IPPs) also increased by P0.0224 per kWh, net of deferred generation costs, due to lower average IPP dispatch and Peso depreciation affecting around 98% of IPP costs that were dollar-denominated.
Tempering the increase in the generation charge is the P0.2988 per kWh decrease in charges from PSAs following the deferral of a portion of generation costs and lower fuel costs of SPPC covered by its 2024 emergency PSA and SBPL.
WESM, IPPs, and PSAs accounted for 33%, 29%, and 38% of Meralco's total energy requirement for the period.
Transmission and other charges
The transmission charge for residential customers increased by P0.1450 per kWh due to higher ancillary service charges following the partial settlement of 30% of the total reserve trading amount of all WESM trading transactions during the March 2024 supply period, as ordered by the ERC.
In addition, the ERC also approved the implementation of a new Feed-in Tariff Allowance (FIT-All) rate of P0.0838 per kWh starting June 2024, from the previous rate of P0.0364—or an increase of P0.0474 per kWh.
Taxes and other charges also registered a P0.1046 per kWh net increase.
Pass-through charges for generation and transmission are paid to the power suppliers and the grid operator, respectively. In contrast, taxes, universal charges, and FIT-All are all remitted to the government.
Meralco's distribution charge, on the other hand, has stayed the same since the P0.0360 per kWh reduction for a typical residential customer in August 2022.