The scheduled pass-on of the universal charge (UC) of the Power Sector Assets and Liabilities Management Corporation (PSALM) for stranded contract costs (SCC) will slightly raise the charges to be billed by Manila Electric Company (Meralco) this month by P0.101 per kilowatt hour.

Nevertheless, PSALM’s P0.1938 per kWh UC-SCC will be softened by the downtrend in charges on at least three cost components at aggregate P0.09 per kWh.

The company has apprised media that its generation charge will be reduced by P0.05 per kWh to P5.24 from P5.19 per kWh last month; while the combined cut in transmission and system loss charges had been close to P0.04 per kWh.

“On a year-on-year comparison, this month’s generation charge is P0.14 per kWh lower than March 2012’s level of P5.33 per kWh,” the utility firm said.

Meralco reiterated that the reduction in these charges “will partly offset the universal charge-stranded contract cost of PSALM which will be reflected in the bills starting this month.”

The UC-SCC of PSALM arises from liabilities it incurred due to the cost difference in its contracts which are not necessarily recoverable from market rates. Total recovery accounted for roughly P65 billion over four years.

Meralco has been reflecting adjustments on cost components that move on a monthly basis; primarily generation cost and the ancillary services (AS) component being passed on by the National Grid Corporation of the Philippines.

As far as generation charge is concerned, the big-time cut was implemented by Meralco at its February billing, following cost reductions due to cheaper power supply deals it cornered from private power producers.

Coming from such plunge in generation charge, it is highly expected that it will experience a plateau in this billing month, unless driven by wild swings in prices at the Wholesale Electricity Spot Market (WESM).

Meralco’s procurement of supply from private generators has somehow shifted sourcing for approximately half of its power requirements, which traditionally had been with the National Power Corporation.

On last month’s supply, Meralco noted that it bought supply from new power generation sources at P0.19 per kWh cheaper; while cost of procurement from contracted independent power producers had been lower by P0.25 per kWh.