Generation charges in the franchise area of power retailer Manila Electric Co. will likely rise in July because of the tight power supply experienced by the Luzon grid last month.
Meralco vice president and head of utility economics Lawrence Fernandez said the recent red alert raised on May 31, June 1, June 2 and yellow alert on June 4 signaled the continued tightness in generation supply.
Fernandez said the demand in the Luzon grid rose to an all-time high of more than 11,600 megawatts, exceeding even the pre-pandemic record of around 11,300 MW set in 2019.
“Thus, with record-high demand and tight supply, there was pressure on WESM [Wholesale Electricity Spot Market] prices to remain elevated, which will in turn push up the generation charge for July,” he said.
Meralco sources a portion of its power supply requirement from the WESM, the trading floor of electricity, on a monthly basis.
“We also see the depreciation of the peso and the ongoing restriction from the Malampaya gas supply putting upward pressure on the generation charge,” Fernandez said.
He said the secondary cap was triggered when high WESM prices were sustained for five days, which was recently shortened by the Energy Regulatory Commission to three days.
“This means that buyers are exposed to high prices first before the cap is imposed. Even then, the secondary cap is P6.245/kWh, which is still much higher versus WESM prices in past months,” Fernandez said.
Meralco’s power rates also went up slightly in June as the overall rate for a typical household increased by P0.0798 per kilowatt-hour to P8.6718 per kWh from P8.5920 per kWh in May.
This was also due to higher charges in the WESM which increased by P1.6322 per kWh.
Demand in the Luzon grid increased by 1,131 MW to 11,556 MW in May from 10,425 MW in April with the increase in temperature and economic activity.
The Luzon grid was placed on yellow alert on May 5, due to insufficient operating reserves as average capacity on outage remained at the 3,000 MW level.