MANILA, Philippines -- Meralco customers will see their electricity bills go down by 7.9 centavos per kilowatt-hour (kWh) this month, as the generation charge component falls to just P4.50 per kWh.

This means that residential customers using 100 kWh a month will experience an P8 reduction in their bills, while those consuming 200 kWh will see their bills go down by P18.80.

Meralco vice president for utility economics Ivanna Dela Pena said very low prices at the wholesale electricity spot market, as well as the continued use of banked gas by independent power producer First Gas Power Corp. for its 1,000-megawatt (MW) Sta. Rita and 500-MW San Lorenzo plants last month were the main drivers for the reduction.

This banked gas comprised natural gas that was not consumed in 2002 to 2003 and was priced much lower. Natural gas prices were benchmarked against oil prices and moved with the preceding six months’ average basket of fuel prices as specified in the contract with the gas sellers – in this case the Malampaya consortium.

The First Gas plants ran fully on banked gas in December, as compared with just 50-60 percent in November.

Prices at the Wesm, meanwhile, went down in December due to lower demand during the long holiday break, mainly due to colder weather.

This cushioned the impact of the recently approved generation rate adjustment mechanism (Gram) and incremental currency exchange rate adjustment (Icera) of the National Power Corp., which should have jacked up Meralco’s generation charge for January, she said.

The impact of the approved Napocor Gram and Icera filings on Meralco should have been an increase in generation charge of around 7.2 centavos per kWh, at a purchase level of around 40 percent from the state-owned power firm.

Dela Pena said the lower-cost power from the Wesm and from First Gas also helped offset the effect of the collection of P2.11 billion in unbilled line congestion cost for July 2008, which Meralco had already remitted to Wesm operator Philippine Electricity Market Corp. in August last year.

The computation of Meralco’s January generation charge also included the return to customers of the P392-million net settlement surplus balance as of November 2008.

The net settlement surplus refers to excess payments made by Wesm customers to power sellers. This is passed on to end-users, but is later refunded upon recalculation.

The reduction in the generation charge likewise resulted in lower system loss charges this month.

However, with the end of the Christmas holidays, Meralco said prices at the Wesm were again expected to normalize.

The First Gas plants would also start using contracted gas quantities for 2009, which were indexed to world oil prices of the past six months.