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Expect lower electricity bills this month

MANILA, Philippines—Customers of the Manila Electric Co. will pay lower electricity bills this month due to the reduction in the power distributor’s generation charges and other bill components.

In a statement, Meralco said electricity bills would go down by 30 centavos per kilowatt hour. The reduction will be reflected in the July billings.

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Thus, a household consuming 200 kWh of electricity monthly will see a P60 decrease in its electricity bill this July.

Generation charges, which take up around 60 percent of monthly bills and are essentially passed-on costs, went down by P0.33 per kWh to P5.33 per kWh from P5.66 per kWh.

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Meralco said the lower generation charge was largely due to the P0.14 per kWh reduction in the rates of its new power supply agreements and the P6.04 per kWh reduction in the rates of power purchased from the Wholesale Electricity Spot Market (WESM). These offset a P0.27 and P1.66 per kWh increase in the rates of  Independent Power Producers (IPPs) and the National Power Corp. (NPC), respectively.

Power plants selling to Meralco under the power supply agreements continued to offer the lowest rates and accounted for 54 percent of Meralco’s total energy requirements in June.

Meanwhile, the cost of power purchased from the WESM decreased as supply normalized and demand eased with the onset of the rainy season.

The IPPs accounted for 34 percent of Meralco’s total energy requirement. The remaining 12 percent came from the WESM, NPC, and others.

On the transmission charge, Meralco said this “did not register any movement.” However, taxes, which consist of the value added tax or VAT and local franchise tax, increased by P0.02 per kWh.

Other bill components, which include the system loss charge, power act reduction, the previous month’s adjustment on generation cost, subsidy, and universal charges, had a total reduction of P0.04 per kWh.

Meanwhile, distribution charges, which take up less than a fifth of monthly electricity bills, will increase by an overall average of P0.0254 per KWh from this month up to June 2014 as approved by the Energy Regulatory Commission (ERC).

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Meralco head of utility economics Larry Fernandez said that the P0.0254 per KWh was just an overall average and not a straightforward increase. The actual impact, he said, will be different for each type of customer (e.g. residential, small, commercial, large industrial). Meralco has yet to come up with simulations on the rates per customer type.

Earlier, Meralco reported that it surpassed all regulatory performance standards, which include the frequency and duration of interruptions, voltage regulation, system loss, time to process applications, time to connect customers, and call center performance.

Under the ERC’s rules for Performance-Based Regulation (PBR), the ERC reviews and verifies the rates of all private distribution utilities every year, considering such factors as their performance against technical and customer service standards.

The PBR is an internationally accepted rate-setting methodology used by the ERC to set the transmission and distribution wheeling rates.

With PBR, consumers can expect a higher level of service, while allowing utilities to achieve a reasonable return and ensure efficient service and timely system upgrades.

Meralco reiterated that of the different bill components, only the distribution charge goes to the power distributor.

Meralco said it does not earn from the other charges found in the bill, the largest of which is the generation charge. Payment for the generation charge goes to power suppliers such as the IPPs, plants selling to Meralco under the power supply agreements, NPC, and WESM. The rest of the pass-through costs include transmission, taxes, universal charges, and other charges.

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TAGS: Business, electricity bills, electricity rate, generation charges, Manila Electric Co., MERALCO, Power Distribution
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