Customers of Manila Electric Co. (Meralco), the country’s largest power distributor, will start the new year with a P0.2189 per kilowatt-hour (kWh) reduction in their monthly electricity bills.

At a press conference on Monday, Meralco Vice President and Head of Corporate Communications, Joe R. Zaldarriaga, said the rate adjustment means a typical household will now pay P11.7428 per kWh this January, a decrease from the previous month’s rate of P11.9617 per kWh.

For residential customers consuming 200 kWh, the decrease translates to savings of around P44 on their total electricity bill this month.

Zaldarriaga attributed the rate cut primarily to a reduction in the generation charge, which dropped by P0.1313 per kWh, bringing the charge to P6.8358 per kWh. The decline is mainly due to lower charges from the Wholesale Electricity Spot Market (WESM) and Independent Power Producers (IPPs).

WESM charges, on the other hand, fell by P0.8840 per kWh due to improved supply conditions in the Luzon Grid, where average peak demand dropped by 471 MW. Additionally, the average capacity on outage decreased by 305 MW.

Charges from IPPs, which make up a significant portion of Meralco’s supply, decreased by P0.1593 per kWh partly due to the appreciation of the peso, which impacts 97 percent of IPP costs that are dollar-denominated. Lower fuel costs and higher dispatch from the First Gas-Sta. Rita plant also contributed to the reduction.

Notably, the savings tempered the P0.5638 per kWh increase in charges from Power Supply Agreements (PSAs), which resulted from lower plant dispatch. PSAs, WESM, and IPPs account for 34 percent, 30 percent, and 36 percent of Meralco’s total energy requirements, respectively.

In addition to the generation charge, transmission, and other charges saw a net reduction of P0.0876 per kWh. These pass-through charges are paid directly to power suppliers and the grid operator.

Taxes, universal charges, and the Feed-in Tariff Allowance (FIT-All) are remitted to the government.

Meralco’s distribution charge has remained unchanged since a reduction in August 2022, which saw a P0.0360 per kWh decrease for typical residential customers.