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Home News

Fuel rollback next week, power rate cut in August

Alena Mae S. FloresbyAlena Mae S. Flores
August 6, 2022, 1:00 am
in News, Top Stories
Reading Time: 6 mins read
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Consumers can expect a price rollback of more than P1 per liter across all oil products next week due to the softening of global oil prices.

Sources told the Standard on Friday that the price of unleaded gasoline is seen to go down by P1.56 per liter, diesel by P1.96 per liter, and kerosene by P2.42 per liter.

The Department of Energy (DOE) attributed the rollback to the decision of the Organization of the Petroleum Exporting Countries (OPEC) and its allies to increase its output by 100,000 barrels per day in September and ongoing recession fears in the US that could dampen demand.

As this developed, power retailer Manila Electric Co. (Meralco) is hoping its overall power rates will go down in August despite indications of a rise in generation charges, its spokesperson Joe Zaldarriaga said.

Electricity charges for August “can go either way,” Zaldarriaga said.

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“In the event of an upward pressure, it may not go up as much, but there is also the possibility of downward pressure.”

He said Meralco has yet to receive final billings from its suppliers, but there may be “an upward pressure” in the generation charge.

US President Joe Biden called on OPEC and its allies to increase oil production, but they only agreed to increase output by 0.1 percent of global demand.

World oil prices have trended downward in the past weeks due to lockdowns in China and fears of a global economic slowdown.

On August 2, local oil companies cut diesel prices by P0.60 to P0.75 per liter, and kerosene by P0.75 per liter. However, gasoline increased by P0.75 per liter.

These resulted in the total year-to-date adjustments at a net increase of P19.65/liter for gasoline, P32.35/liter for diesel, and P27.30/liter for kerosene.

As for Meralco, Zaldarriaga said: “We expect the quarterly repricing of the Malampaya natural gas in July, where more than 30% of our supply comes from, to weigh on the August bills.”

The repricing reflects the impact of the international oil prices in the past six months when Dubai crude averaged around $102 per barrel, an 18 percent increase from September 2021 to March 2022 average price.

“However, we hope that the improved Luzon grid situation, which had a red alert and series of yellow alerts in the June supply month, lead to lower WESM prices and mitigate the impact of higher fuel prices and peso depreciation,” Zaldarriaga said.

WESM, or the Wholesale Electricity Spot Market, is the trading floor of electricity in the country.

“In addition, this month’s rates will no longer include deferred generation costs, which accounted for about 13 centavos of the generation charge in July,” the official said.

The generation charge is a pass-through cost, and Meralco’s distribution charge has not moved since its reduction in July 2015.

In July, Meralco’s overall rate went down by P0.7067 per kWh to P9.7545 per kWh from P10.4612 per kWh in June.

The July rate reduction effectively reversed all increases in the overall power rates since the start of the year.

The distribution-related refund ordered by the Energy Regulatory Commission (ERC) offset the increase in generation charges.

With the volatility in world oil prices, Senator Sherwin Gatchalian said there is a need for Congress to examine the impact of the ongoing war between Russia and Ukraine on the country’s energy security and affordability.

In filing Senate Resolution No. 78, Gatchalian pointed out that the drastic increase in global oil and coal prices has reverberated across the domestic market, with local pump prices experiencing consecutive weekly gains.

Gatchalian took note of the 22% increase in gasoline prices to P77.71 per liter in May from P63.58 per liter in January, and diesel pump prices soared by 49% to P75.92 per liter in May from P50.95 per liter in January.

During the same period, many PUV drivers opted not to ply their usual routes while provincial buses and taxis were operating only at 20-30 percent capacity, leading to a lack of available public transportation, according to Gatchalian.

“There is a need for Congress to be apprised of the short, medium, and long-term effects and implications of the Russian invasion of Ukraine on the Philippine economy, in particular, the country’s oil supply and the effects of the continuous elevated global oil and coal prices on domestic oil and petroleum products,” the senator said.

Gatchalian, the chairman of the Committee on Energy in the 18th Congress, conducted a hearing in March to seek specific solutions and programs from the DOE and relevant government agencies to mitigate the impact of the Russia-Ukraine crisis on the country’s oil supply and prices.

ERC directed Meralco in an order dated June 16 to implement an additional Distribution True-Up refund totaling P21.8 billion for 12 months or until the amount is fully refunded.

ERC recalculated the difference between the Actual Weighted Average Tariff (AWAT) and the final Interim Average Rate (IAR) of P1.3522 per kWh from July 2015 to June 2022, following a downward adjustment in Meralco’s Regulatory Asset Base for the 3rd Regulatory Period.

The refund is equivalent to P0.8656 per kWh for residential customers and will appear as a separate line item called “Dist True-up 4” in the power bills starting this month.

Meralco’s generation charge for July went up by P0.2166 to P6.7756 from the P6.5590 per kWh registered the previous month, driven by higher spot market rates and an increase in power supply agreements (PSAs) charges.

Charges from the WESM increased by P3.9649 per kWh amid tight supply conditions in Luzon.

Meralco sourced about seven percent of its supply requirements from the WESM, the trading floor of electricity, during the June supply month.

Charges from Meralco’s PSAs also increased by P0.3186 per kWh due to the peso depreciation and higher coal prices.

The peso depreciated by about five percent, the steepest decline in the peso’s value since June 2003, affecting around 32 percent of PSA costs that are dollar-denominated.

The continued increase in international coal prices also contributed to the rise in the PSA rate.

Charges from Meralco’s Independent Power Producers (IPPs) decreased by P0.4669 per kWh after the First Gas power plants reduced the use of the more expensive liquid fuel.

The First Gas Sta. Rita and San Lorenzo power plants received additional natural gas supply from Malampaya with the shutdown of the 1,200 MW Ilijan power plant beginning June 4.

Meralco said this more than offset the effects of the peso’s depreciation on IPP charges.

Meralco sourced the bulk of its power requirement from the PSAs at 50 percent, followed by the IPPs at 43 percent.

The July generation charge also includes the last installment of deferred generation costs for the April bill, equivalent to an add-on of around P0.13 per kWh in the generation charge.

The transmission charge for residential customers declined by P0.0012 per kWh, while taxes and other costs also registered a net decrease of P0.0565 per kWh.

Tags: GasolineKeroseneoil productsOrganization of the Petroleum Exporting Countriesprice rollback
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Alena Mae S. Flores

Alena Mae S. Flores

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