Meralco said rising global fuel prices, peso depreciation, and the country’s reliance on natural gas contributed to the recent increase in electricity prices, as the utility outlined its position during a recent Senate hearing on power rates.

In a statement addressed to the Senate Committee on Energy, Meralco Senior Vice President and Head of Regulatory Management Jose Ronald V. Valles said the increase in generation charges reflected “the spike in international fuel prices and peso depreciation as a result of the ongoing conflict in the Middle East,” as well as the government’s policy of using natural gas as a transition fuel and the moratorium on new coal-fired power plants.

Valles said the Department of Energy (DOE) had directed Meralco to continue sourcing power from the First Gas Sta. Rita natural gas-fired power plant to help secure the Luzon grid. 

Around 50% to 60% of the utility’s supply requirements come from natural gas-fired facilities, he said.

“If not contracted by Meralco, the Luzon grid will experience supply shortage which would result in prolonged power interruptions,” Atty. Valles said.

He added that Meralco is the only distribution utility sourcing electricity from natural gas-fired power plants specifically to support grid security, which can make its generation costs higher than those of utilities relying more heavily on coal and lower-cost renewable energy sources.

Valles also outlined the regulatory process governing power procurement, saying distribution utilities are required to conduct competitive selection processes under Department of Energy and Energy Regulatory Commission (ERC) rules before supply contracts are submitted to the ERC for approval.

He said Meralco’s power supply agreements with Excellent Energy Inc. and South Premiere Power Corp. underwent competitive bidding, while its contract with First Gas Sta. Rita did not. 

All of the utility’s power supply agreements have since been approved by the ERC, he added, as compliant with the least-cost supply requirement under the Electric Power Industry Reform Act (EPIRA).

The ERC also conducts a confirmation process during the implementation of supply contracts to ensure only allowable generation costs are passed on to consumers, Valles said.

He added that electricity bills are affected not only by generation charges but also by power consumption, with higher demand during the summer months typically pushing prices upward.

Valles noted that Meralco’s distribution charges have declined by 18% since 2014.

“Customers are paying less today for the distribution-related charges that go to MERALCO compared to more than a decade ago,” he said.

The Senate Committee on Energy hearing brought together energy sector stakeholders to discuss the recent increase in electricity prices and their impact on consumers, as lawmakers continue to examine issues affecting power affordability and supply reliability.

What do you think? What policy measures should the government prioritize to keep electricity affordable while ensuring a reliable power supply? Share your thoughts with the Power Philippines community.

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