‘Force majeure’ sets off another drop in Meralco rates

By: Ronnel W. Domingo - 04:32 AM July 11, 2020

https://business.inquirer.net/302362/force-majeure-sets-off-another-drop-in-meralco-rates

Manila Electric Co.’s (Meralco) overall rates will decrease by 2.86 centavos per kilowatt-hour in the July billing, the fourth reduction in as many months, as the distribution giant continues to enjoy relief from its take-or-pay schemes with suppliers.

Meralco began invoking force majeure in April as the new coronavirus disease (COVID-19) pandemic stunted demand. This spared it from paying a minimum contracted volume of electricity, thus resulting in an adjustment in consumer bills beginning that month.

The July round will allow resi­dential customers of Meralco consuming 200 kwh to see a decrease of about P6 in their bills.

The distribution giant’s latest overall rate is pegged at P8.6966 per kwh, from P8.7252 in June. The series of decreases now total 32.32 centavos per kwh.

Meralco said in a statement that with rate decreases in January and February, net rate reductions already total P1.32 per kwh. Rates went up by 2.78 centavos per kwh in March.

According to Meralco, this month’s overall rate is significantly lower than P9.9850 per kwh in July 2019, and also the lowest since September 2017.

“Because of the reduction in power demand in its service area during the modified enhanced community quarantine and general community quarantine, Meralco continued to invoke the force majeure provision in some of its power supply agreements (PSAs), reducing the generation cost that would have been charged by suppliers,” the company said.

“This July, the [force majeure] claim totaled about P265 million, equivalent to customer savings of [8.77 centavos] per kwh in the generation charge,” it added. “This represents avoided charges from the temporary suspension of mid-merit supply contracts recently approved by the Energy Regulatory Commission.”

Meralco said that without these claims, the total rate would have increased by 7.17 centavos per kwh from the June rate.

“For the past four months, the savings from [force majeure] claims totaled around P1.85 billion,” Meralco said. For July alone, the generation charge decreased by 0.69 centavo per kwh to P4.3344 per kwh from P4.3413 per kwh in June.

Rates at the wholesale electricity spot market—which provided 16 percent of Meralco’s supply—also decreased by P1.7803 per kwh due to reduction in line rental cost related to Meralco’s supply contracts.

On the other hand, the cost of supply from independent power producers increased by 43.54 per kwh. This was attributed mainly to lower average plant dispatch due to the five-day scheduled maintenance outage of two generators at the San Lorenzo power complex in Batangas.

The cost of supply source through PSAs increased by 4.55 per kwh as a result of lower force majeure claims. Even then, the peso’s appreciation mitiga­ted further increases in IPP and PSA charges.

Further, Meralco said there was a decrease of 4.26 centavos per kwh in the transmission charge, but this was offset by a 2.09-centavo increase in tax and other charges.