Meralco consumers will pay lower rates in July

More than seven million customers of power utility giant Manila Electric Company (Meralco) will feel relief in their pockets this month, as the tariffs pass-on of the company is highly anticipated to go down in the July billing cycle.

According to Meralco Vice President and Head of Corporate Communications Joe Zaldarriaga, “indications show a big possibility of lower generation charge in the July bills.”

The generation charge accounts for the biggest chunk, at more than 50-percent, of all the line items being passed on in the monthly electric bills of consumers.

The Meralco executive explained that “this is due to lower demand we’ve observed with the onset of the rainy season which could have an effect on WESM (Wholesale Electricity Spot Market) prices.”

Price outcomes for trading in the spot market typically signal sufficiency of supply or tightness, depending on how demand has been shaping up as stirred up by an array of market fundamentals including the dispatch availability of the capacities of power plants, outages or de-rating on electric generating assets, and even the extreme swing in weather conditions.

Beyond that, Zaldarriaga conveyed that “lower coal prices and the Philippine peso appreciation versus the US dollar will likely impact our suppliers’ charges in the incoming billing month.”

Meralco has a mixed bag of power suppliers such as: contracted independent power producers (IPPs); power supply agreements (PSAs) with other private generation companies (GenCos); the new supply deals it entered into plugging capacity gap arising from legally-strained PSAs; as well as procurements from the spot market.

With the rainy season taking reign last month, there had been higher availability of capacity from the hydro plants but that is seen changing with the incursion of El Niño phenomenon through the second half of this year.

In fact, lowering water elevations at dams are already manifesting and the naturally-occurring consequence of that will be extremely de-rated or even non-availability of hydro-generated capacities in the coming months.

Additionally, the climate-induced rise in sea surface temperatures may also have impact on other power plants, including thermal generating assets that are largely relying on water for their cooling systems, hence, that is another realm that must be evaluated by industry players as well as policymakers as that may also strain power plant operations.

At this point, the government is hoping that the capacity lack from hydros could be countervailed by the recent return to the grid of the Ilijan gas plant, the injection of additional capacities from the power plants that had been set free from previous transmission bottlenecks, as well as the commercial operation of some greenfield assets.