Weak peso, higher WESM charges to raise Meralco rates this month

CONSUMERS of Manila Electric Co. (Meralco) may have to brace for higher power rates in July due to the peso depreciation and higher charges at the Wholesale Electricity Spot Market (WESM).

“There is strong pressure towards an increase in the July generation charge from the peso’s depreciation and from WESM prices,” said Meralco vice president and head of utility economics Lawrence Fernandez.

The WESM is the trading floor of electricity, where prices go up when supply is tight and demand is high.

“The secondary price cap was implemented for 16 of the 31 days in the June supply month, indicating sustained high WESM prices. The situation was aggravated by the red and yellow alerts recently experienced by the Luzon Grid,” Fernandez said.

National Grid Corp. of the Philippines placed the Luzon grid on red and yellow alerts for several hours on June 18 due to transmission line trippings.

NGCP identified the cause of the outage on Saturday as the “underbuilt” lines owned by Peninsula Electric Cooperative Inc. (PENELCO).

Due to insufficient reserves, the grid operator continued to place the Luzon grid on yellow alert for several hours from June 20 to June 23.

“The only factor that may (partly) offset these factors is the reduced use by the First Gas plants of more expensive alternative fuel,” Fernandez said.

He said the shutdown of the 1,200-megawatt Ilijan natural gas plant in Batangas, with the end of their gas supply and purchase agreement (GSPA) with the Malampaya consortium, led to the delivery of more supply to First Gas. However, reserves of the Malampaya gas field are depleting, forcing First Gas to use liquid fuel for its power plants.

Fuel charges from the First Gas power plants last month rose 8 percent with the increased usage of more expensive liquid fuel amid the Malampaya supply restriction.

WESM prices also increased 12 percent last month to P6.9253 per KWh from P6.4865 per kWh in May.