How Meralco is reducing electricity prices

MANILA, Philippines — Anticipating deficiencies in power supply that might result in higher electricity prices, the country’s largest power retailer has come up with solutions to reduce potential spikes in consumers’ monthly billings.

The price concern has been acknowledged by Alfredo S. Panlilio, Manila Electric Company (Meralco) Senior Vice-President and Head of Customer Retail Services and Corporate Communications, who noted that it is a “major concern and challenge” as prices are currently volatile and very unstable.

“Price arrows are perennially volatile, more often on an upward trajectory. We must find ways to point them downward,” he explained during the recent 3rd Energy Efficiency Forum sponsored by the European Chamber of Commerce in the Philippines.

Meralco is the biggest power retailer and distributor in the country, serving more than 5 million households in Metro Manila and outlying provinces. 

To lessen the ire of consumers who normally blame Meralco for price hikes, the company initiated efforts to lower prices.

“We have mobilized innovative ways and projects to empower our customers so that they, too, can manage the way they consume electricity and manage their electric bills as well,” Panlilio said.

Lingering concerns 

One of the most contestable causes in electricity price hikes is the generation charge, which is a pass-through cost from power suppliers.

Consumers believe Meralco has had a hand in the increasing generation cost. The retail giant, however, clarified this.

“Let me stress that Meralco does not earn a single centavo from the generation charge,” Panlilio said.

Instead, the company solely earns through the distribution charge, which is a significantly smaller portion of the total monthly electric bill as compared to the generation charge. It comprises only about 16% of the total electricity bills consumers receive every month.

Even in the past, electricity charges is a national concern with the generation charge already comprising the bulk of the electric bill. Other major cost components include the transmission charge and, of course, taxes.

Increasing rates also result from fickle electricity costs in the Wholesale Electricity Spot Market (WESM). The WESM is the trading center of power. Here, suppliers and buyers agree on the price of electricity based on a supply and demand scenario. 

Quoting data, Panlilio said the net increase of generation charge from January to June 2012 was 67 centavos per kilowatt hour (kwh). 

As increasing energy demands break-even with current supplies, sudden peak in prices should be anticipated.

“We expect the price volatility to persist if demand continues to go up, especially if no additional capacity comes on stream in the immediate future,” Panlilio said.

Investments, audits 

At the heart of Meralco’s program to control price hikes is its venture into the core of what triggers cost increases: the power generation business. 

This year, Meralco PowerGen Corporation (MGEN), the power generation arm of Meralco, has entered a partnership with local energy giant Aboitiz Power and Taiwan Cogeneration in developing a 600-megawatt circulating fluidized bed coal-fired power plant in Barangay Cawag, Subic.  

“MGEN is also working on other generation plants and projects including liquefied natural gas, wind, hydro and clean coal,” Panlilio narrated.

Meralco has likewise inked new Power Supply Agreements (PSA) for about 2,900-mw of capacity from existing generators. The contracts are still being reviewed by the Energy Regulatory Commission (ERC). 

The power retail giant has strengthened its electric distribution infrastructure to lessen system loss, or the electricity wasted during transmission.  

According to Meralco, the company’s system loss level from January to June outperformed the mandated cap of 8.5% set by the ERC. Cumulative savings passed on to consumers have reached billions for the past 4 years. 

“We implemented preventive measures to lessen the occurrence of pilferage. We will sustain such efforts in order to further depress system loss level,” Panlilio said.

The company has also started walk-through audit services and power quality trouble-shooting activities for companies and industries with contracted capacities of 500-kw and above. 

The troubleshooting service involves a team of expert engineers who will go to the facilities and identify ways to improve energy efficiency in the operation aspect. “Good power quality is equal to higher energy efficiency,” Panlilio noted.

Meralco has also devised a Peak and Off- Peak (POP) program for businesses and big residential customers. Prices are shown depending on the time periods when energy was consumed.

Smart grid

Meralco’s future plans also involve a smart grid, a new-generation network which enhances the reliability of the service and expands customers’ ability to manage their power consumptions. 

“Smart grid provides a platform for new services such as pre-paid electricity and the home area network,” he said.

By mid-2013, Meralco will start to pilot prepaid electricity. Meralco is also working on giving consumers the home area network to manage home appliances. The idea is ambitious, but possible.

“Imagine ‘instructing’ your home appliances from a remote location, using your smart phone, tablet and other mobile devices, through the Internet. Now, wasn’t that something we just saw in movies decades back?” Panlilio explained.

Apart from this, Meralco is also into “another kind of innovation, which touches on our commitment to sustain a healthier environment.” A case in point is Meralco’s venture into the development of electric vehicles. 

Together with government agencies, Meralco has worked closely with local government units, such as  the city of Mandaluyong  on the use of electric vehicles. A charging station is being developed too by the retail giant.

“Meralco has taken the 180-degree turn in the name of energy efficiency and conservation,” Panlilio said. “Our experience has taught us that sustainability is a product of divergent efforts. Not one solution, but multiple solutions of the varied kind.” – Rappler.com