Meralco wants to collect extra P0.30/kWh from March to May

By Lenie Lectura – February 9, 2017

from Business Mirror

THE Manila Electric Co. (Meralco) proposed to collect from its customers an additional P0.30 per kilowatt-hour (kWh) in generation charge for three months starting in March.

Meralco said it wants to recoup some of the cost of the expensive liquid fuel utilized by the gas plants during the 20-day shutdown of the Malampaya natural-gas facility.

In its application for approval of the staggered recovery and payment of the differential generation charge for the February supply month, Meralco seeks to collect a total of P0.9174 per kWh.

“The incremental fuel costs due to the use of liquid fuel is expected to increase the overall rate of Meralco for the March 2017 billing by about P0.9174 per kWh,” it said in its eight-page application.

Meralco, however, proposed to implement this in three billing months, starting with P0.30 per kWh in March electricity bills, another P0.30 per kWh in April, and the balance to be reflected in the May power bills.

“To mitigate the effect of an abrupt increase in generation cost due to the use of liquid fuel, especially that the WESM [Wholesale Electricity Spot Market] prices may also increase during the period, Meralco proposes that instead of reflecting the full incremental fuel-cost component of the total generation cost in March 2017 generation-charge rate, it be allowed to implement the increase in three billing months starting March until May 2017,” Meralco said.

Shell Philippines Exploration BV is the operator of the gas facility in Palawan. It is currently undertaking maintenance activities that include repair of the subsea facilities, upgrades on the platform, and maintenance on the onshore plant. Work started January 28 and will end on February 16.

The gas facility fuels the following gas plants: the 1,000-megawatt Santa Rita, the 500-MW San Lorenzo, the 1,200-MW Ilijan, and the 97-MW Avion plant. These power plants supply an aggregate capacity of 3,211 MW to the Luzon grid, 2,565 MW of which are supplied to Meralco’s franchise area.

These plants are now using alternative fuel to continue operation and generate electricity during the maintenance period. However, this is more expensive than natural gas. Natural gas as fuel only costs around P4 per kWh, while replacement fuel, such as diesel, costs around P6 to P8 per kWh.

Meralco, in its application, said the estimated incremental fuel cost over the period of the 20-day outage would amount to P2.4 billion.

“While Meralco is prepared to reflect the true cost of generation in its billing to its customers…it is cognizant of the financial burden such rate hike will place on its customers,” it said.

In the same application, Meralco proposed to defer payment to such power suppliers of the respective amounts of generation charge owing to them for the February 2017 supply month.

“Meralco can only pay its power suppliers for the differential generation costs by recovering said costs from its customers,” the utility firm said, adding these proposals are without prejudice to any application that maybe subsequently filed for the recovery of any appropriate carrying charges.

“Considering the pressing nature of the instant application to allow Meralco to stagger recovery of the incremental fuel costs and the corresponding payment to affected power suppliers, for a period of three months starting March to May 2017 billings, and therefore avoid any consequential financial prejudice to Meralco, its suppliers, and most especially, the consumers, it is therefore urgent a provisional authority be immediately issued upon filing and pending hearing of this application,” Meralco said.