Meralco electricity rates to go down on cheaper oil

by Lenie Lectura, January 23, 2015
from BusinesMirror

The continuous decline in world oil prices would result in lower electricity bills for consumers of the Manila Electric Co. (Meralco), as fuel price is one of the factors used in computing generation charge, an official of the Department of Energy (DOE) said on Friday.

Energy Undersecretary Zenaida Y. Monsada said Meralco consumers will “experience the impact of Malampaya pricing” in their February electricity bills.

Meralco’s Utility Economics Head Lawrence S. Fernandez said the company sources power supply from power plants that are fueled by the Malampaya natural-gas field. These power plants include the 1,200-megawatt (MW) Ilijan combined-cycle power plant, the 1,000-MW Santa Rita and the 500-MW San Lorenzo natural-gas plants.

Based on the December 2014 supply month, natural-gas-fired plants accounted for around 60 percent of the energy supply of Meralco, while coal-fired plants accounted for around 37 percent.  The remaining 3 percent is a mix of oil-based and Wholesale Electricity Spot Market (WESM)-sourced energy.

“Meralco’s natural-gas pricing is linked with that of the price of oil,” said Monsada, adding that any adjustment in fuel price will “definitely” affect the price of natural gas.

Oil prices in the world market have plunged to six-year lows since last year, resulting in steep reduction in local pump prices. Meralco consumers, however, can only feel the impact of this starting February, because the price of Malampaya natural gas is adjusted per calendar quarter.

This means that the new natural gas price will be reflected in the generators’ bills to Meralco this January supply month, which would then be an input to the computation of the generation charge for the February bills, according to Fernandez.

“The natural-gas price is based on a basket of indexes, which includes oil prices.  The natural-gas price for January to March 2015 will partly be based on the average oil prices for the six-month period of July to December 2014,” Fernandez said.

“The natural-gas price for October to December 2014 was partly based on average oil prices for the six-month period of April to September 2014.  We will need to await the actual billings of the natural-gas-fired plants to Meralco to know the actual extent of the change in the natural gas,” he added.

The utility firm is on track to hitting its P17.8-billion core profit guidance for 2014. If and when Meralco closes the year with P17.8 billion in core profit, the figure represents a 4.6-percent hike in core income for 2014 versus 2013.

Electricity sales for 2015 are expected to grow by 3 percent on account of higher usage from industrial customers, which registered the highest increase.

“We will end [2014] with roughly a 3-percent growth in sales volume,” said Meralco President Oscar Reyes, who added that commercial accounts also contributed to the growth, mainly from new connections and increased consumption.

Reyes added that the last quarter of 2014 is expected to register “a little over 5-percent” growth in sales volume. October sales stood flat at 5.2 percent, while November sales grew 6.6 percent, he said.

Meralco customers grew to 5.5 million at end-September. In terms of energy sales mix, commercial accounts for 39 percent of total sales, with residential and industrial at 30 percent and 31 percent, respectively.

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