June 08, 2015

Manila Electric Co’s (MER)’s pass-through charges lower by P0.58/kWh in June

As reported by the press, Manila Electric Co’s (MER) pass-through charges will decrease by P0.58/kWh in June. This month’s reduction marks the fourth time this year that rates have gown down. According to MER, generation charge will go down by P0.36/kWh to P4.45/kWh, the lowest level since Oct 2010. The drop in generation charge was mainly due to lower cost of power purchased from independent power producers (down by P0.67/kWh to P4.20/kWh) and power supply agreements (down by P0.59/kWh to P3.91/kWh), brought about by lower fuel costs and higher plant dispatch.

The lower rates from these suppliers offset the higher cost of power purchased from the Wholesale Electricity Spot Market (WESM), which rose by P2.85/kWh to P7.06/kWh. Other pass-through charges such as transmission, taxes and other charges collectively decreased by P0.13/kWh.

Our take: The rate reduction will have no impact on Meralco’s margins with the savings accruing directly to consumers via lower electricity rates. Compared with the same period last year, this month’s generation charge of P4.45/kWh is lower by 16% or P0.86/kWh than June 2014’s average rate of P5.3105/kWh. – WealthSec