April 09, 2015

Manila Electric Co’s generation charge higher in April but lower YoY

As reported in various news agencies, customers of Manila Electric Co (MER) will see a P0.27/kWh increase in their power bills this month due to higher power generation costs and other pass-through charges. This month’s generation charge increased by P0.20/kWh to P5.41/kWh from P5.21/Kwh, albeit lower than the initial estimate of P0.46/KWh. The cost of purchased power was higher, brought about by the scheduled maintenance shutdown of the Malampaya natural gas facility, which started last 15 Mar and will last until 14 Apr.

Generating plants using natural gas, which comprised approximately half of MER’s total supply, had to use more expensive liquid fuel during the Malampaya shutdown. Other pass-through charges, such as taxes, subsidy, system loss and universal charges also increased by a combined P0.08/kWh but transmission charges declined by P0.01/kWh.

Our take: Despite the month-on-month increase in power generation charge, this month’s power cost remains lower than last year, which should bode well for consumers. MER’s Apr generation charge of P5.41/kWh is 8% lower than last year’s P5.90/kWh while the Feb-Apr average of P5.2858/kWh (which is computed based on the Jan-Mar 2015 generation costs) is lower by P0.26/kWh or 5% than the same period last year. The lower cost of fuel, especially in oil, has helped bring down prices this year.

Moreover, prices at the Wholesale Electricity Spot Market are significantly lower in March this year than in 2014 due to less plant outages and relatively cooler weather. It remains to be seen whether this trend will be sustained for the rest of the summer. Demand is expected to pick in the coming weeks and should reach its peak sometime in May. For as long as no plants go on forced outage, the power supply situation in the Luzon grid should remain stable. – WealthSec