Higher fuel prices might hike Meralco rates in Feb
By Myrna M. Velasco – February 6, 2022, 7:20 AM
from Manila Bulletin
The upticks in fuel prices will likely drive up the overall electricity rates to be billed by power utility giant Manila Electric Company (Meralco) to its customers in this February billing cycle.
According to Meralco Vice President Lawrence S. Fernandez, the major rate component being assessed at this point is the generation charge given “the expected increases in fuel costs.”
Generation charge accounts for more than 50 percent of the segregated line items being passed on in the electric bills by the utility firm. The generation charge is the payment by Meralco to its power suppliers.
He explained that “Malampaya’s quarterly repricing will affect the February generation charge, reflecting the rise in world crude oil prices in the second half of 2021.”
Fernandez also emphasized that the repricing of fuel sourced from the Malampaya field will primarily “affect around one-third of Meralco’s supply”, in particular, its capacity portfolio coming from the 1,000-megawatt Santa Rita, 500MW San Lorenzo, and 414MW San Gabriel gas-fed plants.
The pricing for Malampaya gas has been oil-linked, chiefly benchmarked with the Dubai crude which is the pricing reference for the Asian market. On top of that, the foreign exchange rate will also be a factor in the repricing process.
Additionally, the Meralco executive noted that “coal prices are projected to increase, mirroring the rise in the world market,” although he qualified that this will just impact on a much smaller share or just around 5 percent of Meralco’s supply.
The saving grace being eyed by the utility firm that may offset the fuel price uptrends, according to Fernandez, will be the billing of other suppliers – primarily for capacity procured from the Wholesale Electricity Spot Market (WESM) as well as those from its contracted power supply agreements (PSAs) with private generation companies.
Nevertheless, in a recent market update report of WESM’s Independent Electricity Market Operator of the Philippines (IEMOP), it indicated that spot market prices actually climbed to P6.98 per kilowatt hour (kWh) in the January supply cycle versus previous month’s average of P6.43 per kWh.
The spot market operator conveyed that higher settlement prices had been “due to forced and planned outages of major plants, which later on resulted in the imposition of secondary price cap.” This refers to that event in the spot market when cost settlements had to be capped at P6.245 per kilowatt hour (kWh) due to sustained high prices breaching the thresholds set by the Energy Regulatory Commission.
The power industry had seen last month the “unfamiliar episode” of “yellow alert” or insufficiency of power reserves in the biggest power grid of Luzon during a period when demand was generally low compared to summer months.
Apart from plant outages, supply was similarly strained by generation de-rating of power plants, including the gas generating facilities, because of the depleting state of resource extraction from the Malampaya field.
