Weaker peso, higher coal prices to hike power rates

MANILA, Philippines – A weaker peso and higher coal price could pressure electricity rates up in the next billing periods, Manila Electric Co. (Meralco) said.

These are the two factors that could put pressure on generation cost in the coming months, Meralco senior vice president and head of utility economics Larry Fernandez said on the sidelines of a Senate hearing yesterday.

“One is the depreciation of the peso, many of the inputs to generation cost are dollar denominated, so any depreciation of the peso can have an impact on the generation cost,” he said. “Second, we noticed increases in coal price. If this continues, it might affect the generation charge.”

Fernandez said these are factors affected by world events like the exchange rate and coal prices.

The peso breached the 47 to $1 level on Sept. 11 and more recently the 48 to $1 level on Sept. 26, the local currency’s weakest level in seven years.

Meanwhile, Meralco gets 37.1 percent of supply from coal power plants, based on its first half report.

With the volatility in the global scene, the Meralco official said it is still difficult to determine the trend in the coming months, particularly in October, since the power distributor has yet to receive billings from power generators.

“We need to see if they will already compute the foreign exchange effect and the more updated coal prices in their bills to us,” Fernandez said. “But we are continuing to monitor the fuel prices and the foreign exchange rate.”

Currently, Meralco’s overall rates are at record lows. “I think the pressure is to keep it where it is but there are already pressures for a slight increase in generation cost,” Fernandez said.

Meralco recently announced a reduction of P0.0451 per kilowatt-hour (kwh) in overall rates to P8.46 per kwh, lower compared to September 2015’s P8.55 per kwh.

For the period, the lower transmission charges helped offset the higher generation charge caused by instances power supply shortage during the supply month.