Power rates to seesaw in January, February–Meralco

By Lenie Lectura - January 4, 2018
https://businessmirror.com.ph/power-rates-to-seesaw-in-january-february-meralco/

Manila Electric Co. (Meralco) customers can expect further reduction in power rates this month, mainly due to the decrease in generation charge. But they should also brace for hikes in their electricity bills starting in February due to the impact of the Tax Reform for Acceleration and Inclusion (TRAIN) Act on the power sector, a company official said on Thursday.

Meralco, according to Utility Economics head Lawrence Fernandez, said there was a reduction in capacity-fees from power plants under power supply agreements (PSAs), due to reconciliation of outage allowances for the calendar year.

Hence, it is “highly” likely, said the Meralco official, that there is a further reduction in the January 2018 generation charge, following the reduction last December.

“We expect the overall rate to still go down this January, mainly due to significantly lower capacity fees from several plants under PSAs. This follows the annual reconciliation of outage allowance of the plants,” Fernandez said in a text message.

In December 2017 electricity rates went down to P9.2487 per kilowatt-hour (kWh) from the previous month’s P9.6272 per kWh, mainly on account of a P0.3035-per-kWh decrease in generation charge.

The generation charge decreased from P4.9080 per kWh last November to P4.6045 per kWh last December, primarily due to the peso’s appreciation and lower Wholesale Electricity Spot Market (WESM) charges.

The peso-dollar exchange rate affects around 97 percent of Independent Power Producers (IPPs) and 60 percent of PSA charges. IPPs and PSAs each provided 44 percent of Meralco’s total requirement. The share of WESM purchases to Meralco’s total requirement last month was 12 percent.

While the rates are expected to go down this month, the same official warned that the TRAIN law is expected to affect power rates through higher coal and oil excises taxes and through the reimposition of value-added tax (VAT) on the National Grid Corporation of the Philippines’s (NGCP) wheeling charges. The Meralco official said the effect of excise taxes may be felt in the February bills to consumers.

“If the gencos [generation companies] and NGCP incorporate the effects of the TRAIN law in their bills to distribution utilities this January, end-users will see the increases starting their February bills,” Fernandez said in an interview. “For Meralco customers, the estimated increase due to a 12-percent VAT will be 7 centavos per kilowatt hour,” the Meralco official added.

Fernandez explained that the effect of the VAT on the transmission will be on top of the impact of the excise taxes on fuel and other pending adjustments, such as for the feed-in tariff (FiT)-All. Meralco reiterated that it does not earn from the pass-through charges, such as the generation and transmission charges. Payment for the generation charge goes to the power suppliers, while payment for the transmission charge goes to the NGCP. Taxes and other public policy charges like the FiT-All are collected by the government.