Higher oil prices to raise February electricity rates

By Lenie Lectura -  February 5, 2017

http://www.businessmirror.com.ph/higher-oil-prices-to-raise-february-electricity-rates/

THE Manila Electric Co. (Meralco) said it is expecting an increase in generation charge, a major component of an electricity bill, this month due to higher crude-oil prices.

“There will likely be an increase in the February generation charge,” Meralco Utility Economics Head Lawrence S. Fernandez said in a text message.

Actual figures have yet to be finalized by the utility firm. An announcement within the week will be made. “We are still gathering data from suppliers,” he added.

Aside from higher crude-oil prices, Fernandez said expensive fuel being used by the gas plants, as well as the normalization of capacity fees of the Pagbilao and Ilijan power plants,
would cause the upward adjustment in generation charge.

“We expect the generation charge to normalize from the reduction in January. There was a reduction then in the capacity fees of Pagbilao and Ilijan due to the annual reconciliation of outage allowances. This reduction will no longer be present in February,” he added.

Generation charge last December stood at P3.70 per kilowatt hour (kWh), P0.22 per kWh lower compared to January 2016’s P3.92 per kWh.

This was attributed to the P0.59- per-kWh reduction in the cost of power supplied by PSA (power
supply agreement) plants caused by the lower capacity charges of Pagbilao and Ilijan. The reduction in capacity fees is due to the annual reconciliation of outage allowances that is done at the end of each year under the contracts approved by the Energy Regulatory Com-
mission (ERC). Fernandez said the capacity fees from these suppliers normalized in February.

Another reason behind the anticipated hike in generation charge is the shift to alternative fuel by the gas plants that are affected by the 20-day shutdown of the Malampaya gas facility. The gas facility fuels three gas plants: Santa  Rita (1,000 MW), San Lorenzo (500 MW) and Ilijan (1,200 MW).

These plants use alternative fuel to operate and generate electricity during the maintenance period, which started on January 28 and will last until February 16. However, this is more expensive than natural gas. Natural gas as fuel costs only around P4 per kWh, while replacement fuel, such as diesel, costs around P6-P8 per kWh.

Thus, a rate hike is forthcoming. A Department of Energy official earlier said a rate hike could not be avoided.

“It’s an issue of a change of fuel from a cheaper one to a more expensive one,” Energy Undersecretary William Felix Fuentebella said.