Meralco slashes electricity rates as oil companies cut pump prices

Electricity rates this month and fuel prices this week are down.

On Monday, the Manila Electric Company (Meralco) announced a P0.2087 reduction in August tariffs to P9.5458 per kilowatt-hour (kWh) from P9.7545 per kWh last month. This equates to a reduction of around 42 P in the total bill for a residential customer consuming 200 kWh.

With this month’s adjustment, Meralco’s tariffs now have a combined reduction of P0.9154 per kWh over the past two months and a net decrease of P0.2315 per kWh year-to-date.

Meralco had previously anticipated a rate increase this month, mainly due to an increase in gas prices in Malampaya of up to 15%. However, this was mostly offset by the Energy Regulatory Commission’s (ERC) rate reduction orders.

“Three factors contributed to lower August rates. These include the completion in July of the recovery of deferred production costs from April, the reduction in the use of expensive alternative fuels by First Gas and of the ERC-ordered reduction in Meralco’s distribution, supply and metering charges from August, more than offset the effect of Malampaya’s quarterly price review,” said Lawrence Fernandez, Head of Economics of Meralco’s Utilities.

Generation charges, which account for the bulk of consumers’ electricity bills, decreased by P0.1944 to P6.5812 per kWh this month from P6.7756 per kWh last month due to lower Power Supply Agreement (PSA) charges, which more than offset increases in Independent Power Producer (IPP) and Wholesale Electricity Spot Market (WESM) charges.

PSA charges recorded a reduction of P0.4273 per kWh, as this month’s tariff no longer included deferred generation cost recovery for the April bill. Higher excess energy from some PAAs, which are being priced lower, also contributed to the decline.

On the other hand, IPP charges have increased by 0.4213 pula per kWh with the continued rise in international fuel prices. Malampaya’s underlying natural gas price rose 15% from this quarter, reflecting recent surges in global crude oil prices.

Electricity suppliers who have repercussion adjustments on Malampaya fuel, namely First Gas-Sta. Rita, First Gas-San Lorenzo and First Natgas-San Gabriel accounted for 44% of Meralco’s supply during the period. The reduction in the use of more expensive alternative fuels by First Gas plants mitigated a further increase in IPP royalties.

Meanwhile, WESM loads remained elevated, registering an increase of P0.0433 per kWh due to tight supply conditions on the Luzon grid.

Despite the reduction in demand, the network was placed on yellow alert on July 5 due to insufficient operating reserves after the forced shutdown of several large power plants. In addition, persistently high spot market prices triggered the imposition of the secondary price cap almost 27% of the time.

PSAs, IPPs and WESM represented 52%, 43% and 5% of Meralco’s energy requirements for the period, respectively.

The implementation of distribution-related refunds totaling 48.3 billion pesos continues to temper monthly customer bills. This equates to a total repayment rate of 1.8009 pula per kWh for residential customers.

Meralco’s distribution charge reduction, equivalent to P0.0360 per kWh for typical residential customers, also contributed to the overall rate reduction for August.

This follows the ERC’s June 16 decision on Meralco’s final provisional average tariff, which reduced the final average distribution tariff for July 2015 to June 2022 from P1.3810 to P1.3522 per kWh . This is already reflected in customers’ August bills in the form of lower distribution, supply and metering charges.

Prior to this adjustment, Meralco’s distribution fees were unchanged from the July 2015 reduction.

The transmission charge for residential customers has increased by 0.0235 pula per kWh. Taxes and other charges, on the other hand, registered a net decrease of 0.0018 pula per kWh.

The collection of 0.0025 P per kWh representing the Universal Charge – Environmental Charge remains suspended, as directed by the ERC.

Generation and transmission transmission charges are paid to the electricity providers and system operator respectively, while taxes, universal charges and feed-in tariff allowance (FiT-All) are all remitted to the government.

Meanwhile, oil companies announced more than P2 per liter of petroleum product price cuts from Tuesday morning.

In separate notices, they said gasoline prices would fall by 2.10 pesos per litre, diesel by 2.20 pesos per liter and kerosene by 2.55 pesos per litre. This is the 6th consecutive week of falling diesel and kerosene prices.

Seaoil, PTT, Phoenix, Shell, Caltex, Unioil, Total, Petron said they would adjust their prices at 6am on Tuesday August 9th. Cleanfuel, meanwhile, will apply the price cut at 8:01 a.m.

Last week, oil companies implemented price cuts for diesel by P0.60/litre and kerosene by P0.75/litre. In contrast, gasoline increased by 0.75 P per liter.

This resulted in the total adjustments since the beginning of the year amounting to a net increase of P19.65/litre for petrol, P32.35/litre for diesel and P27.30 /litre for kerosene.

Oil companies adjust their prices every week to reflect movements in the world oil market.

The local petroleum industry uses Mean of Platts Singapore (MOPS), which is the daily average of all trade transactions between the buyer and seller of petroleum products as rated and summarized by Standard and Poor’s Platts, a transmission service market based in Singapore.

Gasoline, diesel and kerosene MOPS have gone down lately.

Crude prices fell as Covid-19 cases rose in China with no easing of restrictions, coupled with a counter-seasonal increase in gasoline inventories in the United States.

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