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Meralco rates up again

Power firm blames IPPs for increase

By Amy R. Remo
Philippine Daily Inquirer
First Posted 00:45:00 07/07/2010

Filed Under: Electricity Production & Distribution, Consumer Issues

MANILA, Philippines?Expect your electricity bills to go up again this month.

The country?s biggest power distributor, Manila Electric Co. (Meralco), Tuesday announced a ?slight? increase in rates by 5.8 centavos per kilowatt-hour (kWh) in July due to a rise in generation charge to P5.6546 per kWh.

This meant that a residential customer consuming 100 kWh a month will have to pay more by around P5.80. Those consuming 200 kWh will shoulder a higher increase of around P11.60.

Ivanna dela Pea, Meralco first vice president and utility economics head, explained that generation charges went up this month because the company?s independent power producers imposed a 6-centavo-per-kWh increase, from an average of P4.54 per kWh in May to P4.60 in June.

In April, amid rotating brownouts, Meralco upped its charges by P1.20 per kWh, citing a rise in the cost of power it buys from suppliers. This meant an additional P120 for customers who used 100 kWh a month, and P360 for those who used 300 kWh.

Meralco, which has 4.7 million customers in 29 cities, including Metro Manila, Bulacan, Rizal and Cavite, said the adjustment was due to a ?significant rise in generation cost? at the wholesale electricity spot market (WESM).

At the time, Metro Manila and other parts of Luzon were suffering from rotating brownouts due to a power supply shortfall, which stemmed from the shutdown and low-generating capacities of several power plants in Luzon, and fuel supply problems.

Higher electricity bills, coupled with power outages, drew the ire of most customers, who complained of paying double for the same amount of electricity they consumed in the previous billing month. An online protest movement was mounted on the social networking site Facebook.

Following the complaints, Meralco announced in May a reduction of as much as P1.26 per kWh, citing an ?ostensible reduction? in the prices of power it buys from suppliers. It said the price of electricity purchased from the WESM dropped by P3.90 per kWh, while cost of power derived from IPPs also dropped by P1.24 per kWh.

IPPs, again

Meralco derives power from three IPPs?the 1,000-megawatt Sta. Rita and 500-MW San Lorenzo natural gas plants, both owned by Lopez-led First Gas Corp., and from Quezon Power Ltd.

The IPPs, according to Dela Pea, were actually Meralco?s cheapest sources of power last month as the effective cost of power from state-run National Power Corp. (Napocor) was higher at P5.59 per kWh, while that of the WESM stood at P7.90 in June.

The utility is still hoping that the onset of the rainy season will usher in lower rates over the next few months. Typically, power rates decline during this period and increase during summer.

?The start of Napocor?s wet season rates this July should provide a tempering effect in the generation charge next month,? said Joe Zaldarriaga, Meralco external communications manager.

?Hopefully, the incoming rainy season will bring rains sufficient to improve the capability of many of the hydro plants which, in turn, can potentially lead to the easing of prices in the (next few months).?

Revenue neutral

Zaldarriaga reiterated that any change in the generation charge was ?revenue neutral,? which meant that Meralco did not earn from it.

?The generation charge can move from month to month based on many factors beyond our control like fuel prices, working condition of the power plants and WESM prices, among others. Should there be adjustments in the generation charge, it is our duty to reflect these changes in the customers? bills, such as this month?s reduction,? Zaldarriaga said.

Earlier, Meralco had said that the generation cost, which accounts for 50-60 percent of a customer?s electric bill, went directly to its power suppliers and added nothing to its income.

?Meralco does not add any markup to the cost of electricity purchased from these electricity suppliers whether it is an upward or downward adjustment,? Zaldarriaga said.

Meralco had warned of a rate increase as early as March, saying customers ?may have to brace for much higher electricity prices? because of increases in power cost. In February, the generation charge was already higher by P1.01 per kWh compared to that in January.

In January, Meralco voluntarily suspended the implementation of an increase in its charges, pending a resolution filed by Robert Mallillin, which questioned the decision of the Energy Regulatory Commission allowing the firm to increase its distribution, supply and metering charges by an average of 26.9 centavos per kWh starting Jan. 1, 2010. With a report from Kate Pedroso, Inquirer Research



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