By BusinessWorld,Cedtyclea

Copyright bworldonline

By Sheldeen Joy Talavera, Reporter

POWER DISTRIBUTOR Manila Electric Co. (Meralco) expects a lower overall rate this month, as a stronger peso is seen to have brought down the cost of power purchased from its suppliers.

“We expect lower generation charge to pull down the overall rate this September,” Meralco Vice-President and Head of Corporate Communications Joe R. Zaldarriaga said in a statement on Tuesday.

The potential easing in the generation charge was triggered by peso appreciation, affecting costs of Meralco’s suppliers that are dollar-denominated, he said.

The peso closed at P57.13 per dollar on Aug. 29, strengthening by nearly P1.19 from its P58.32 finish on July 31, according to the Bankers Association of the Philippines’ reference exchange rate.

The generation charge typically accounts for more than 50% of the monthly electricity bill.

Mr. Zaldarriaga said the potential reduction in the generation charge is projected to more than compensate for the cost recovery claims filed by San Miguel Global Power Holdings Corp. (SMGP) for its terminated contracts.

The Energy Regulatory Commission (ERC) earlier allowed South Premiere Power Corp. (SPPC) and Sual Power, Inc. (SPI) (formerly San Miguel Energy Corp.) to collect P5.1 billion in total cost recoveries, to be implemented over a six-month period starting in September.

The case stemmed from the 2022 joint petitions by SPPC and SPI with Meralco, seeking temporary price adjustments under their 2019 power supply agreements to recover higher fuel costs due to Russia’s invasion of Ukraine.

“Overall, we are optimistic that the reduction in generation charge will be able to offset increase in other bill components,” Mr. Zaldarriaga said.

The potential decline in the September electricity bill would end two straight months of increases.

MERALCO FACES RENEWABLE COSTS
While Meralco seeks to comply with its obligations under the Renewable Portfolio Standards (RPS), the distribution utility (DU) may be exposed to the renewable energy market (REM).

In an open commission meeting on Tuesday, among the agendas of the ERC was the power supply agreement (PSA) between Meralco and San Roque Hydropower, Inc. (SRHI), a subsidiary of SMGP.

After emerging as a winning bidder in Meralco’s competitive selection process, SRHI is supposed to supply 340 megawatts (MW) of mid-merit contract capacity, starting Feb. 26 at a rate of P6.95 per kilowatt-hour (kWh).

However, in a decision dated Dec. 3, 2024, the ERC approved only P5.1908 per kWh, a rate lower than what was proposed under the supply deal.

Alvin Jones M. Ortega, acting director for ERC Regulatory Operations Service, cited Meralco’s comment in May informing the Commission of the possible termination of the PSA with SRHI.

SRHI sought reconsideration of the ERC’s decision to impose a different rate and limit the sourcing of contracted capacity to eligible renewable energy (RE) facilities.

ERC Chairperson and Chief Executive Officer Francis Saturnino C. Juan said the delays in acting upon Meralco’s application may result in purchasing RE certificates (RECs) in the market.

“If Meralco is unable to source renewable energy generation, it will be compelled to purchase RE certificates at prices that could reach the established cap,” Mr. Juan said.

Under the RPS, DUs, electric cooperatives (ECs) and retail electricity suppliers are required to source a certain portion of their energy supply from eligible RE resources.

Aside from entering into power supply deals, participants may comply with their RPS obligations by buying RECs, a certificate equivalent to a one-megawatt-hour of RE generation at a price capped at P241 each.

“The longer the Commission takes to act on this application, the more Meralco may be exposed to additional costs in order to comply with its RPS obligation by purchasing what are called RE certificates from the RE market,” Mr. Juan said.

Meralco’s majority owner, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.

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