How MERALCO can cut its rates to consumers
Tuesday, August 01, 2006
By NEIL MUGAS
The Manila Times Reporter
If MERALCO, the largest distribution utility in the Philippines accounting for about 70 percent of the Luzon market, chooses to increase its offtake from its private independent power producers (IPPs), customers covered by its franchise area can expect a substantial decrease in electricity rates.
Ivanna de la Peña, MERALCO vice president for utility economics, said the price of electricity charged to its more than 4 million customers, in 25 cities and 88 municipalities can indeed decrease if MERALCO is allowed to buy more power from its private IPPs than the National Power Corp. (NAPOCOR).
This is because its private IPPs, including its sister firm, First Gas Power Corp., which operates the 1,000 megawatt (MW) Santa Rita and 500-MW San Lorenzo gas-fired plants in Batangas, Quezon Power and Duracom Power charge lower generation rates than those of NAPOCOR.
Lower IPP rates
MERALCO records seen by The Times show that NAPOCOR billed the company some P5.69 per kilowatt-hour (kWh) in generation and transmission costs in March, higher than the rates charged by its IPPs. Generation cost by the Santa Rita plant amounted to only P4.80 per kWh while San Lorenzo billed P5.29 per kWh. Quezon Power, on the other hand, billed MERALCO only P5.40 per kWh.
These rates will even go down some more if its IPP purchases are dispatched on a minimum energy quantity on the level at which plants become cost-efficient.
In the past, MERALCO could not buy as much power from its power, because it signed a 10-year supply contract with NAPOCOR, which ended only in 2004. The two parties meantime have yet to secure another contract.
At present, MERALCO buys half of its power requirement from NAPOCOR and sources the rest from IPPs, resulting in a blended rate. In May this year its generation cost was pegged at P4.9419 per kWh.
MERALCO’s generation rate changes every month, depending on the blended rates of NAPOCOR and its IPP. The rate is computed based on the automatic adjustment of generation rates by distribution utilities.
"Increased offtake from the IPPs leads to lower cost as the IPPs’ fixed charges are spread over more kilowatt-hour into lower rate per kWh," de la Peña explained.
MERALCO also collects cost recoveries in its generation and foreign-exchange costs through the Generation Rate Adjustment Mechanism and the Incremental Currency Exchange Rate Adjustment. Only the ICERA payments from customers go to MERALCO,
Distribution costs
Besides the generation and transmission cost it passes to its customers, MERALCO also collects an average distribution rate including supply and metering of around P1.04 per kWh.
Social considerations
Although MERALCO computes its rates apparently with room for considerable amount of returns, de la Peña assured its consumers that the company also complies with the social considerations inputed in the rates so as not to burden customers with higher rates.
MERALCO charges its residential customers distribution rates that are graduated according to quantity of consumption. Customers who consume less enjoy lower rates per kilowatt-hour.
The company also charges its residential clients under a supply and metering method. They are billed per kWh, so low-consuming customers pay according to consumption only.
A very noteworthy public service is MERALCO’s "lifeline rates" to its residential customers who use up only 100 kWh or less a month. MERALCO arranges for these poorer electricity users to be subsidized by customers with very high energy consumption.
In May 2006 MERALCO’s lifeline users totaled 1.56 million. This is about 40 percent of the total number of residential customers.
posted by philpower @ 1:53 PM,
