Why your Meralco bill will be higher in July – and might rise again soon

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July’s increase is not from Meralco raising its own distribution rate, but that could be next, with the ERC expected to decide by August or September whether to allow a higher charge

MANILA, Philippines – Meralco customers will pay more for electricity in July after higher fuel costs, the shutdown of the Malampaya gas facility, and tight power supply conditions pushed up the cost of generating electricity, even as regulators are set to decide by August or September on a separate rate reset that could raise Meralco’s distribution charge.

The overall residential rate will rise by P0.3428 per kilowatt-hour (kWh), from P14.4833 per kWh in June to P14.8261 per kWh in July.

The actual change in a customer’s bill will still depend on how much electricity the household used during the billing period. This means the rate adjustment alone would add approximately the following amounts at different household consumption levels:

• P34 at 100 kWh
• P69 at 200 kWh
• P103 at 300 kWh
• P137 at 400 kWh
• P171 at 500 kWh

Drivers of rate hike

The biggest contributor to the increase was the generation charge, which rose by P0.1800 per kWh to P9.2504 per kWh from P9.0704 per kWh in June.

The generation charge pays for the electricity that Meralco buys from power plants and the electricity spot market. It is normally the largest part of the bill, but it is considered a “pass-through” charge, meaning Meralco collects the amount from customers and turns it over to power suppliers instead of treating it as income from its distribution business.

The continuing Middle East conflict and its impact on international fuel markets pushed up charges on Meralco’s power supply agreements (PSA) by P0.2678 per kWh to P8.8694 per kWh.

Another major factor was the scheduled month-long shutdown of the Malampaya natural gas facility beginning June 15. Malampaya supplies locally extracted natural gas to power plants in Batangas, including the Sta. Rita and San Lorenzo plants.

With Malampaya unavailable, the plants had to use imported liquefied natural gas or LNG, which was more expensive. Charges from First Gas and Prime CoreGen climbed up by P0.3613 per kWh to P10.6489 per kWh.

Prices at the Wholesale Electricity Spot Market also increased by P1.0056 per kWh to P8.0337 per kWh as record-high electricity demand in Luzon tightened supply conditions.

Transmission and other charges added another P0.0668 per kWh to the July increase.

Another looming rate adjustment

July’s increase doesn’t come from Meralco raising the amount it charges for operating its own distribution network, which remains a major source of the electricity giant’s earnings.

The company’s distribution charge pays for the poles, wires, substations, meters, billing services, and other infrastructure used to deliver electricity from the grid to homes and businesses.

Meralco has not raised its own distribution charges since 2015, when the period covered by its last completed rate reset ended. That could change once the Energy Regulatory Commission (ERC) completes the long-delayed review of the rates Meralco may charge for operating its distribution network.

A rate reset is the regulator’s periodic review of how much a distribution utility needs to collect to operate its network while earning a reasonable return.

Meralco’s application proposes raising the average distribution charge from P1.35 per kWh to P2.34 per kWh, or by P0.99 per kWh, but the proposal is not yet approved and may still be modified or rejected by regulators.

ERC Chairperson Francis Saturnino Juan said the commission expects to take up its staff recommendation toward the end of August or in September, after completing inspections of Meralco’s assets.

Asked whether it would be fair to approve higher Meralco rates amid allegations of inaccurate meter readings, Juan said the complaints would have to be handled separately from the rate-reset case. He also stressed that the review would not necessarily result in higher rates.

“If there are violations committed by Meralco, these are separate matters, separate from these pending rate proceedings for us to be able to determine what should be correct rates moving forward,” Juan told reporters on Thursday, July 9.

“You’re assuming that there will be any upward adjustment, but what if the results of our evaluation will be for a downward adjustment? And so, if we will just sit on this application because of the pending complaints on the inaccuracies in the meter reading, etc., we will also be depriving the consumers of what should be the appropriate rate that Meralco should be charging them.” – Rappler.com