DOE will act on Meralco hike if it gets a complaint

by Lenie Lectura – February 17, 2016

from Business Mirror

Unlike the Energy Regulatory Commission (ERC), the Department of Energy (DOE) will not question the February power-rate hike imposed by the Manila Electric Company (Meralco) on its customers.

“When it comes to power rates, it is the mandate of the ERC to determine whether the rate adjustment was necessary,” said Energy Secretary Zenaida Y. Monsada.

“That’s the ERC’s mandate. So, we will not interfere. Not at this point,” Monsada added.

When a complaint is filed before the DOE, however, that is the only time the agency will step in. “If the DOE receives a complaint, we have to act on it and we will coordinate with the ERC. We will help in the investigation if we are requested to help,” said Monsada.

On February 11, the ERC directed Meralco “to submit the details and bases of its computation on generation rate, transmission rate, system loss-lifeline rate and other pass through charges, together with the supporting documents thereof.”

Meralco announced last week that the overall rates for its residential customers this month will go up by P0.42 per kilowatt-hour (kWh) to P8.82 per kWh compared to last month’s overall rates.

For a typical household consuming 200 kWh, the P0.42-per-kWh rate hike translates to an additional amount of around P85 to the overall electricity bill.

“We saw that this is a substantial increase. We are asking them to justify the rate hike,” said ERC Chairman Jose Vicente B. Salazar last week.

Meralco has replied to ERC’s letter, saying the increase in the overall rates was due to higher generation charge, which increased by P0.25 per kWh to P4.17 per kWh from last month’s rate.

Generation charge is the largest component of an electric bill.

According to Meralco, the Power Supply Agreement of Meralco (PSA) Independent Power Producers (IPPs) provides for a true up of the capacity fees every December of each year to account for the unutilized outage allowance of the power plants for the full calendar year.

“Meralco claims that capacity charge is expected to increase once it normalizes in January 2016 supply month, which is the basis of the February billing month to the customers,” Salazar said in a text message.

The ERC chief said in an interview, “the submissions of Meralco will be verified by the commission to determine the reasonableness of the pass through charges.”

Asked if the commission will require Meralco to submit additional data, Salazar said Meralco’s compliance and manifestation “already has supporting documents annexed to it. After evaluation, we will know if the supporting documents are sufficient.”

Meralco also said the rise in generation charge was due to increases in the cost of supply from plants under the PSAs, which registered an increase of P0.76 per kWh. Cost of purchases from PSAs, which were low last month due to adjustments from an annual reconciliation of outage allowances, has normalized this month.

Also contributing to the increase in PSA charges are their lower plant-capacity factors, partly due to the scheduled maintenance shutdown of one unit each of the Calaca and Masinloc Power plants.

Further, this increase in the PSA charges more than offset the reduction in charges from the Wholesale Electricity Spot Market (WESM) and IPPs.

Charges from the WESM registered a reduction of P2.21 per kWh, largely due to lower system demand.

The average rate of the IPPs also slightly went down by P0.01 per kWh. The average price of natural gas for the First Gas plants went down, following the quarterly repricing of Malampaya natural gas. However, the lower fuel costs were offset by reduced dispatch levels of the IPPs.

The share of IPPs, PSAs, and WESM to Meralco’s total-power requirements stood at 47.2, 46.7, and 6.1 percent, respectively. Transmission charge, meanwhile, went up by P0.08 per kWh, due to higher ancillary charges.

Following the increase in generation and transmission charges, taxes also increased by P0.05 per kWh. Other charges, likewise, increased by P0.04 per kWh.

Meralco’s distribution, supply and metering charges remain unchanged after a reduction last July.

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.