Business Mirror
06 Dec 2013
THE Manila Electric Co. (Meralco), which announced on Friday that it will hike generation charge by over P3 per kilowatt hour (kWh) in two tranches, would have to seek regulatory approval from the Energy Regulatory Commission (ERC) before it can implement the adjustment in two phases.
“We’re talking to Meralco if they can stagger this but only with the approval of the ERC,” said Energy Secretary Carlos Jericho Petilla, who added that Meralco and the ERC are scheduled to meet on Monday.
“The ERC will be deliberating on Meralco’s generation charge and its proposed staggering of its recovery of generation costs incurred in order to reduce the generation charge increase for December,” ERC Executive Director Francis Saturnino Juan said.
The DOE chief stressed, however, that Meralco should have decided to implement the rate increase, which is estimated to shoot up anywhere from P600 to as much as P750 per kWh for Meralco consumers with an average monthly consumption of 200 kWh, in three phases.
“The least possible impact to the consumer is if Meralco implements it in staggered basis for December, January and February. Why? Because December is an expense month. So, I’d rather have it in three months,” Petilla said.
A P3-per-kWh increase in generation charge translates to about P600 in additional increase in power rates for consumers averaging 200 kWh of electricity usage. Aside from the generation charge, there are other bill components that are expected to go up. These include transmission charge, the value added tax (VAT), local franchise tax (LTF), among others.
A P3-per-kWh increase in generation charge is, according to Petilla, the highest so far in the history.
Generation charge, which is just one of the components of a Meralco bill, will increase because of the scheduled maintenance shutdown of the Malampaya natural gas facility, where the utility firm sources bulk of its power requirements. The Malampaya facility provides natural gas to the 1,200-megawatt (MW) Ilijan combined cycle natural-gas plant owned by Kepco Philippines Corp., and the 1,000-MW Santa Rita and 500-MW San Lorenzo natural-gas facilities of First Gen Corp. of the Lopez group. These power plants provide 40 percent of the electricity needs of Luzon.
As such, Meralco suppliers would now have to source power from the Wholesale Electricity Spot Market (WESM) and other power plants that run on diesel, which is more expensive than natural gas sourced from Malampaya, while the facility undergoes maintenance work.
The scheduled maintenance started on November 9 and will end on December 9. Meralco officials explained that the pipeline shutdown was compounded by the outage of several large power plants. The shutdown of the Malampaya facility happens once every two years.
Petilla said the agency will also look into reports that there was collusion among power plant owners. “We are also going to look into the reported unusual number of outages during the Malampaya shutdown,” he said.
Meralco President and chief executiver officer Oscar Reyes said the implementation of the increase will be in two tranches to cushion the effect of the significant power price spike. The first tranche of increase will be effective in the November consumption rates and is expected to be reflected in the December billing.
Reyes said the second tranche will likely be on top of the January consumption and will be reflected on the February billing.
“[We will] make the second tranche during a month were price is slightly low which is likely to be in January, so the February bill should normalize and should be able to be an appropriate time to implement the balance that was not implemented,” Reyes said.
Reyes has not specified the amount of increase per tranche, but he said the first tranche would likely be higher than the second.
The Meralco executive said the spike in energy prices is due to the confluence of the higher prices in the WESM and the forced and regular maintenance shutdowns of plants specifically the Malampaya facility maintenance shutdown.
The Malampaya gas facility is on a maintenance shutdown from the second week of November to the second week of December this year.
“So before the Malampaya shutdown, there was a deficit of 725 megawatts, and at least about 1,390 megawatts during the Malampaya shutdown and about 540 megawatts after the Malampaya shutdown. These all contributed to the situation we are now facing,” Reyes said in the corporate update briefing of the Metro Pacific Investments Corp., the mother company of Meralco. He said the forced outage of the San Lorenzo Power Plant, Sta. Rita Power Plant and the Ilijan Power Plant also drove the higher generation prices for consumers. All of these power plants are located in Batangas City. The San Lorenzo Power Plant was forced to shut down while the two other power plants are on maintenance.
Reyes said they have deferred putting out the billings for the November consumption until early next week as they are still in discussion as to how the price adjustments, particularly how much increase per tranche, can materialize. source
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