The combined reduction in the generation and system loss charges of Manila Electric Company (Meralco) summed up to P0.305 per kilowatt hour (kWh) which will be reflected in the January bills of its customers.

For the month, this will somehow offset the P0.27 per kWh increase in the company’s distribution charge based on the Energy Regulatory Commission’s (ERC) approval of its updated performance-based tariff.

Of the cost reductions, P0.285 per kWh account for generation charge; while P0.02 per kWh was for system loss charge.

For January billing cycle, the generation charge of Meralco will be slashed to P3.9179 per kilowatt hour (kWh) from last month’s P4,2029 per kWh.

Meralco external communications manager Joe Zaldarriaga noted that “the lower generation and system loss charges will still result in net reduction in the overall bills of our customers this January.”

Early on, Meralco vice president and utility economics head Ivanna dela Peña noted that the company’s generation charge for the month will “significantly go down in January 2010 following the full use of banked gas by the natural gas plants this December.”

The utility firm official also anticipated the drop in its system loss charge, “bringing the cumulative reduction in generation and system loss charges to around 29 to 30 centavos per kWh.”

She further noted that its contracted independent power producers -- First Gas Sta. Rita and San Lorenzo plants, already met their contracted levels of natural gas for 2009 in November, hence they already started using banked gas which is lower-priced as these are still based on price levels in 2002 and 2003.

Meralco noted its contracted IPPs contributed about 55-percent of its supply in December.

While electricity consumers within the Meralco franchise area may have temporary respite this month on the rates they will pay for electricity consumption, the cost movements in the next months may take different twists with prospective cost adjustments in the offing, including those to be billed by state-run National Power Corporation.