Power rates up by P1 in 2 months

Electricity rates are set to increase by P1.08 per kilowatt-hour but will be staggered to manage the impact on consumers, the Manila Electric Co. (Meralco) announced yesterday.

Meralco said February’s rate increase amounts to 75 centavos per kwh, to be followed in March by 33 centavos, mainly due to the increase in the pass-through generation charge.

Meralco spokesperson Joe Zaldarriaga said the final rate adjustment for this month and how the remainder of the increase will be implemented will be announced within the week.

“We are looking at what can we do to help to mitigate the impact (on) consumers,” he said. “We would need to seek regulatory approval for this.”

The higher generation charge is mainly attributed to the normalization of capacity fees following the annual reconciliation of outage allowances, Meralco head of utility economics Lawrence Fernandez said.

Capacity fees are determined through the annual reconciliation of outage allowances that is done at the end of each year under the contracts approved by the Energy Regulatory Commission.

For instance, if power generators do not exceed their outage allowance, their capacity fees are already paid in full and would no longer be reflected for the month of January.

Fernandez also said the depreciation of the peso played a big part in pushing the generation charge higher this month.

“The bills of Independent Power Producers (IPPs) are 95 percent dollar-denominated and bills of power supply agreements (PSAs) are two-thirds dollar-denominated,” he said.

The impact of the Tax Reform for Acceleration and Inclusion (TRAIN) Law was also felt with the imposition of value-added tax (VAT) on the National Grid Corp. of the Philippines (NGCP).

“We are feeling the effect of the imposition of taxes on transmission charges, but this is marginal compared to the overall rate at five to six centavos per kwh,” Fernandez said.

Under Republic Act 9511, NGCP was exempted from paying income tax and VAT. This was repealed in Section 86 of the TRAIN Act, subjecting NGCP to the VAT provision under the National Internal Revenue Code (NIRC).

Meralco’s distribution, supply, and metering charges, meanwhile, have remained unchanged for 31 months, after these registered reductions in July 2015.

Meralco reiterated it does not earn from the pass-through charges, such as the generation and transmission charges.

Payment for the generation charge goes to power suppliers, while payment for transmission charge goes to the NGCP.

Taxes and other public policy charges are remitted to the government.