MANILA, Philippines – The Supreme Court on Tuesday, January 21 heard oral arguments on the P4.15 per kilowatt-hour increase in the rates of the country’s largest power distributor, Manila Electric Company (Meralco). (READ: Meralco inflated charges, SC told)
Meralco blamed the historic-high increase on the shutdown of its biggest power source, the Malampaya natural gas plant, that coincided with the unscheduled outages of its other suppliers.
Meralco said it was forced to source more power from the Wholesale Electricity Spot Market (WESM) at high prices.
This pushed the generation charge up by P3.44 per kWh – accounting for bulk of the rate hike.
What is WESM and how does it work?
WESM was created under Republic Act 9136 or the Electric Power Industry Reform Act, with the objective of bringing power costs down in Luzon and Visayas regions by providing a centralized venue for buying and selling electricity.
Prices at WESM is determined by supply and demand. When supply becomes tight and demand goes up, prices rise.
Meralco maintained that the generation charge is a “pass-through” charge, meaning it does not earn from it and remits payments from consumers to its power suppliers, including WESM participants.
Below is an infographic explaining how the WESM works and affects consumers’ electricity bills. Hover over the dots to learn about the trading process.