Jan. 8--Electricity rates of giant utility Manila Electric Co. (Meralco) again posted a drop this month, because of lower generation charges from power suppliers.

From a decrease of P0.45 per kilowatt-hour in December, the generation rate component of Meralco customers' electricity bills dropped by about P0.08 per kilowatt-hour, bringing down its generation charge to P4.50 per kilowatt-hour this January.

With the reduction in the generation charge, system loss charges also declined. A residential customer consuming 100 kilowatt-hours per month will have an P8 reduction in his or her bill this month.

Customers using 200 kilowatt-hours will see their monthly bills go down by P18.80.

The country's largest distribution utility attributed the decrease to low prices at the Wholesale Electricity Spot Market (WESM), which accounts for less than 10 percent of its power supply, and the use of cheaper fuel by its contracted independent power producers, which supply more than half of its total requirements.

"Very low prices in the WESM and the use of banked gas by the First Gas plants last December were the main drivers for the reduction," said Ivanna de la Pena, Meralco's vice president for utility economics.

Low demand because of the Christmas holidays and the cold weather were factors responsible for the low prices in the spot market in December.

Billing adjustment

Also included in the generation charge computation for January 2009 was the return to customers of the P392 million net settlement surplus (NSS) balance as of November 2008.

The surplus is an adjustment made on the spot-market bills that take into account any surplus or deficit when the total payments of the spot market's customers exceed he total payments to generation companies.

The First Gas plants, which are operated by Meralco's sister firms in the Lopez Group, on the other hand, fully ran on banked gas, versus just 50 percent to 60 percent of its fuel consumption in November.

Banked gas is natural gas that was contracted from suppliers but not consumed by power generators like First Gas. Every year, after the contracted quantities are consumed, power plants start to utilize banked gas, which is relatively cheaper than natural gas.

Mitigating factor

The Meralco official said that the low prices from power suppliers helped mitigate an increase in state-owned National Power Corp.'s (Napocor) power rates and higher costs at the spot market, which is operated by the Philippine Electricity Market Corp. (PEMC), because of transmission constraints in the second half of 2008.