Meralco, AboitizPower seek hike in power rates

MANILA, Philippines — Manila Electric Co. (Meralco) and Aboitiz Power Corp. are seeking to raise power rates under an existing power supply agreement (PSA) due to higher excise tax on coal under the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

In a joint application, Meralco and AboitizPower unit Therma Luzon Inc. (TLI) are asking the Energy Regulatory Commission (ERC) to allow them to implement a higher adjustment on their PSA rate to reflect the effect of the new excise tax rates.

Under the TRAIN Law, coal will be slapped with a P50-per metric ton excise tax in 2018, P100 per MT in 2019, and P150 per MT in 2020.

In ERC’s previous approval, the power regulator recognized the pass-through nature of fuel costs, which include the excise tax on coal.

“It is respectfully reiterated that the increase in the excise tax is a mandatory imposition of the TRAIN Law. Thus, such increase would have to be included in the monthly fees chargeable to and payable by Meralco and consequently recoverable from Meralco’s customers,” the joint application said.

The PSA between Meralco and TLI covers a capacity supply of 350 megawatts (MW) from the latter’s 700-MW coal-fired power generating facility in Pagbilao, Quezon.

It originally has a term of seven years ending on Dec. 26, 2019 but the ERC is currently deliberating on the request of Meralco and TLI to extend the agreement until Dec. 25, 2022.

With the higher coal tax, TLI’s generation is projected to increase by P0.0187 per kilowatt-hour (kwh) in 2018, P0.0425 per kwh in 2019, and P0.0667 per kwh in 2020.

This would mean an increase in Meralco’s generation cost of P0.0013 per kwh in 2018, P0.0030 per kwh in 2019, and P0.0047 per kwh in 2020.

The two firms are asking the ERC to “issue an order granting provisional authority to implement the additional coal excise tax monthly payment to adjust the monthly payments under the PSA.”

Meralco asked the government to reconsider the increase in coal excise tax as the impact will mostly be felt by consumers through higher electricity rates.

Fuel cost is a pass-through charge to be shouldered by end-users.

“An increase in the excise tax on coal would result in higher generation charge and would impact distribution utilities depending on how much they are sourcing from coal,” Meralco said, noting that it sources 31.4 percent of its generation supply from coal.