Manila Electric : Electricity rates go down again in October

Lower transmission charge and generation charge cause decrease in overall rates

MANILA, PHILIPPINES, 6 October 2016 - Meralco announced that the rate for a typical household will go down this October by PhP0.1216 per kilowatthour (kWh), thereby bringing it down to PhP8.34 per kWh. This translates to a reduction of around PhP24 in the electricity bill of a household with monthly consumption of 200 kWh. The reduction is due to downward movements in both generation and transmission charges.This month's overall rate is lower by PhP0.08 per kWh compared to October 2015's PhP8.42 per kWh. This is also the third straight month of reduction in the overall residential rate.
Lower WESM charges cause generation charge decrease

This month, there was a decrease in the generation charge, which is PhP0.0501 per kWh lower than last month's PhP3.9439 per kWh. At PhP3.8938 per kWh, the generation charge is PhP0.1017 per kWh lower compared to October 2015's PhP3.9955 per kWh.
The decrease resulted mainly from lower charges from the Wholesale Electricity Spot Market (WESM) due to lower demand in September as compared to August. This offsets increases in IPP and PSA costs brought about by higher coal prices and the weaker peso against US dollar, from P46.58 to P48.50. Peso depreciation has an upward impact on the peso conversion of the dollar charges of the PSA and IPP plants.
Overall charges from the WESM decreased by PhP1.4747 per kWh. Spot prices softened as peak demand in the Luzon grid was down by around 300 MW in September vis-à-vis August. The share of WESM purchases to Meralco's total requirements went down from 20.6% to 16.1%.
Meanwhile, the cost of power sourced from plants under the Power Supply Agreements (PSAs) increased by PhP0.3257 per kWh primarily due to higher fuel costs. Coal price in the region continued to increase from US$52.85 per Metric Ton (MT) in June 2016 to US$67.41/MT in August 2016. The share of PSAs stood at 47.4%.
Cost of power from the Independent Power Producers (IPPs) also increased by PhP 0.1671 per kWh. This was mainly because of the weaker peso against US dollar. The share of the IPPs to Meralco's total requirements for the September supply month was at 36.3%.
Adjustments in other bill components

There was also a decrease in thetransmission charge by PhP0.0558 per kWh, mainly due to the reduction in NGCP's Ancillary Charges. Taxes and other charges also decreased by a combined amount of around PhP0.0157 per kWh.
Meralco's distribution, supply, and metering charges, meanwhile, have remained unchanged for 15 months, after these registered reductions in July 2015. Meralco reiterated that it does not earn from the pass-through charges, such as the generation and transmission charges. Payment for the generation charge goes to the power suppliers, while payment for the transmission charge goes to the National Grid Corporation of the Philippines (NGCP).
Drop in rates since 2012 narrows gap between Meralco's rates and those in other countries
The downward rate adjustment this month came on the heels of a survey released last week by the International Energy Consultants (IEC), an Australia-based consulting firm specializing in Asian power markets. The IEC study showed that Meralco's average tariff (excluding VAT) has declined 28 percent since January 2012 versus an average decline of 19 percent across 44 countries covered by the survey.
In local currency terms, this translates to a 22 percent decrease in the power utility's average tariff versus an average decline of only one percent across all markets.
IEC Managing Director Dr. John Morris, who led the study, said that Meralco's rates and those from selected markets in the Indo-Pacific region and other parts of the world are now at closer parity than before.
Meralco's average electricity tariff is only 11 percent above the survey's average rate, which reflects an improvement from a similar survey done by IEC in 2012 which showed that electricity rates in the Meralco area was 24 percent above the average rate of surveyed countries in that year.
'This is an excellent outcome for consumers,' Morris said, 'considering that the Luzon power market is unsubsidized and the majority of electricity is produced using imported fuel.'
Morris emphasized the role government subsidies continued to play to make power rates artificially low in markets like Thailand, Indonesia, Malaysia, Korea and Taiwan. He estimated that subsidies in those countries amounted to almost US$50 billion in 2015 alone.
During the period under study, IEC found that lower fuel costs, mainly coal, was a major contributor to the lower power prices in 2016. However, IEC added that the power utility's sourcing strategy, a lower distribution charge, and lower system loss were also major contributors to the decline. Due to these factors alone, Morris said that Meralco customers were able to save around Php 30 billion in power costs. Since 2012, Meralco has been aggressively negotiating competitively priced Power Supply Agreements (PSAs) with new suppliers.