Power rates of Manila Electric Co. are expected to increase in February on higher generation charges and following the implementation of the Tax Reform for Acceleration and Inclusion law.
“We may recall that the January generation charge reduction was largely due to lower capacity fees following the annual reconciliation of outage allowances. As in prior years, we expect capacity fees of PSAs [power supply agreements] to normalize in February,” Meralco head of utility economics Lawrence Fernandez said.
“Hence, we see an uptick in the generation charge next month, though we still need to await final supplier bills to see the effect of such factors as WESM [Wholesale Electricity Spot Market] charges, forex [foreign exchange] rate, fuel prices and others,” he said.
Meralco earlier said its power rates would likely go up by P0.08 per kilowatt-hour in February because of the Train law which lifted the tax exemption enjoyed by the National Grid Corp. of the Philippines and a higher excise tax on coal.
“For NGCP, the Train is in effect Jan. 1, so with their January bill to us, we expect them to apply the VAT [value added tax] on transmission wheeling charges. Before, there was no VAT. Under their franchise, they were exempted. At 12-percent VAT, the estimate is [an increase of] P0.07 per kWh,” Fernandez said earlier.
“If NGCP incorporates it in their January billing, we should expect by February that it will be effective,” Fernandez said.
Under Section 9 of Republic Act No. 9511, NGCP should pay only a franchise tax equivalent to 3 percent of all gross received from its operation.
Payment of the concession fees to the Power Sector Assets and Liabilities Management Corp. “under the concession agreement shall not be subject to income tax and value added tax.” The said tax exemption was repealed under Section 86 of RA 10963.
Fernandez said the impact of higher excise tax on coal on Meralco customer was estimated at P0.01 per kWh.
“For generators, it will depend on their stock of coal if they bought it new or in stock.Our expectations is they will stagger the implementation of the coal tax,” he said.
Fernandez said the company used in its simulations the November dispatch levels of one-third coal utilization and minimal oil generation.
“At P50 per MT, excise tax of coal and oil, the effect is around P0.01. The VAT on transmission charge, that’s P0.07. Total is P0.08 per kWh,” he said.
Meralco’s rates went down by P0.5260 per kWh in January, translating into a P105 reduction in the monthly bill of typical residential customer consuming 200 kWh.
The overall rate went down to P8.7227 per kWh in January from P9.2487 per kWh in December. The lower January rate was mainly due to a P0.5277-per-kWh reduction in the generation charge.
Generation charges declined to P4.0768 per kWh in January from P4.6045 per kWh in December.
Meralco said the reduction in capacity fees of generator companies represents savings immediately passed on to consumers by way of lower electricity rates.
The company sourced 40 percent of its power requirements from its PSAs in December.