Meralco Warns of Higher Power Rates as Peso Falls, With November Refund Due

Dollar costs put fresh pressure on electricity bills

Meralco expects the peso's fall to raise electricity generation charges, adding pressure on households already paying an October 2026 residential rate of P15.0615 per kilowatt-hour. More than half of the company's power sources depend on foreign exchange, according to Jose Ronald V. Valles, its senior vice president and head of regulatory management.

The warning followed the peso's first breach of P64 against the US dollar. The currency closed at P64.17 on Tuesday, its 33rd record low, before recovering by 14.5 centavos to P64.025 on Wednesday. A weaker peso means electricity suppliers need more Philippine currency to pay the same dollar bill for fuel or other costs.

Valles described the exposure during Meralco's financial briefing on Wednesday:

Definitely, it will have an impact especially on the pass-through generation costs. More than 50% of our power sources are dependent on forex (foreign exchange) and that will probably increase the generation rates,

Meralco has not announced the size of a further generation rate increase. The next scheduled relief is a refund starting with November 2026 billing, while a newly approved distribution rate is also expected to take effect that month. Those adjustments concern different parts of the electricity bill.

What October's increase means for a household

Meralco's October rate advisory, dated October 13, set out an increase of P0.3191 per kWh from September's P14.7424. The adjustment followed two consecutive monthly rate reductions.

A kilowatt-hour measures electricity consumption. An appliance drawing one kilowatt continuously for an hour uses one kWh. A household's bill therefore depends on both the price of each unit and how many units it consumes.

Meralco puts the increase for a household using 200 kWh at about P64; a lower estimate of P62 was also reported. Multiplying the published adjustment by 200 gives P63.82, bringing the illustrative bill to about P3,012 at the October rate.

At unchanged consumption, 300 kWh would mean roughly P95.73 more than in September, while 400 kWh would mean P127.64 more. Families using more electricity face a larger peso increase even when the adjustment per unit is identical.

Why gas plants and the peso matter together

October's generation charge rose by P0.4973 per kWh, more than the increase in the total residential rate. Lower charges elsewhere in the bill absorbed part of that rise.

First Gas and Prime CoreGen supplied about 24% of Meralco's electricity requirements for the period. Their charges rose by P3.2206 per kWh of electricity purchased from them, reflecting higher fuel costs and the weaker peso. Meralco said around 89% of their costs were denominated in dollars.

Those plants used liquefied natural gas for September supply. LNG is natural gas cooled into liquid form for transport by ship. Meralco attributed its elevated price to the continuing Middle East conflict, leaving customers exposed to both fuel prices and the exchange rate used to pay for dollar costs.

Power supply agreements, or PSAs, accounted for a much larger 74% of requirements. Charges under those contracts fell by P0.7567 per kWh, helped by South Premier Power Corp.'s use of Malampaya natural gas. That saving tempered currency pressure affecting around 54% of PSA costs.

The figures show why the peso alone cannot determine the next bill. The fuel used, the mix of suppliers and the price under each contract also affect the amount Meralco pays for electricity.

Smaller charges helped contain the increase

The Wholesale Electricity Spot Market supplied only about 2% of Meralco's requirements, but its charges increased by P3.5167 per kWh. Meralco cited billing adjustments and tighter supply in Luzon during September. The spot market is where electricity is traded outside supply contracts, with prices affected by available supply and demand.

National Grid Corporation of the Philippines charges moved in the opposite direction. Ancillary service charges, which help pay for reserves needed to keep the grid stable, fell by P0.1321 per kWh for residential customers. Transmission charges declined by another P0.0063, producing a combined reduction of P0.1384.

Taxes and other charges registered a net decrease of P0.0398 per kWh. Within that total, taxes fell by P0.1436 because of a larger share of indigenous natural gas exempt from value-added tax and the removal of VAT on system loss charges. A P0.0634 increase in the universal charge for missionary electrification partly offset the savings.

Adding the P0.4973 generation increase and subtracting the P0.1384 grid reduction and P0.0398 net reduction in other charges produces the final P0.3191 adjustment. That calculation explains how a generation increase of almost 50 centavos became a household rate increase of about 32 centavos.

Distribution rates follow a separate decision

Meralco pays generation charges to electricity suppliers and transmission and ancillary service charges to NGCP. Taxes and public policy charges go to the government and relevant agencies. The distribution charge pays for Meralco's delivery network and operations, including poles, wires and substations, and allows a regulated return.

Chairman and chief executive officer Manuel V. Pangilinan said peso weakness would not affect Meralco's distribution pricing because the company had no foreign debts. A separate regulatory decision, however, changes the approved distribution rate.

According to Meralco's October advisory, the Energy Regulatory Commission approved an average distribution rate of P1.48 per kWh for July 1, 2026, to June 30, 2030, following more than 15 years without a rate reset. The existing distribution charge had been P1.35 since 2016.

Under ERC Case No. 2026-016, the regulator approved a revenue requirement of about P342 billion over four years, compared with the P532 billion Meralco requested. The P190 billion reduction is about 36% of the request. The revenue requirement is the amount the regulator allows the utility to recover to fund approved operations, investment and returns.

The approved average is not the final rate for every customer category. Meralco expected implementation from November billing, with the exact residential effect still to be determined.

A new refund begins in November

The ERC also approved a P2.64 billion refund covering January to June 2026. Residential customers are due a credit of P0.1733 per kWh beginning in November, for six months or until the full amount has been returned.

For a household consuming 200 kWh, that rate represents a credit of P34.66 in a billing month. The average refund across all customer categories is lower, at P0.1020 per kWh.

Meralco is already implementing two refunds totaling P1.0139 per kWh for residential customers, covering periods from July 2022 to December 2025. The latest credit will be added to those existing adjustments. Neither the newly approved distribution rate nor the new refund was reflected in October's rate.

The refund arises from differences between the distribution tariff Meralco actually collected and the approved tariff during periods without a rate reset. It returns money through bill credits rather than changing the price suppliers charge for electricity.

Spokesperson Joe Zaldarriaga said the distribution adjustment and new refund could together produce a slight net reduction in charges. Generation costs will still move separately, so customers' November totals will also depend on electricity procurement costs and their consumption.

The dates behind the changing bill

Meralco's announcements combine electricity already supplied, rates now being billed and adjustments scheduled for later. Keeping those dates separate helps explain why a currency movement does not immediately translate into a fixed increase on every bill.

• July 1, 2026: The newly approved distribution regulatory period began. It runs through June 30, 2030.
• August 2026: MTerra Solar's first phase began commercial operations, supporting Meralco's generation business.
• September 2026: Fuel use, supply conditions and procurement costs during this supply month fed into October's generation charge.
• October 13, 2026: Meralco announced the P0.3191 per kWh residential rate increase.
• Tuesday before the financial briefing: The peso closed at P64.17 per dollar. It recovered to P64.025 on Wednesday.
• November 2026: The new residential refund is scheduled to begin, and Meralco expects to implement the distribution rate adjustment.

Valles said the company was seeking ways to soften currency pressure:

We are finding ways to manage and offset the increases brought about by the forex depreciation,

October's cheaper contracted power and lower grid charges show how savings in one part of the bill can absorb increases in another. Their size changes with each billing period.

Higher procurement costs accompany stronger earnings

Meralco's purchased power costs rose 20% to P338.7 billion in the nine months through September, from P281.6 billion a year earlier. That is an increase of P57.1 billion.

The average retail electricity rate over those nine months rose 15% to P13.43 per kWh from P11.63. Generation accounted for 65% of that average, making fuel, supply contracts, market charges and currency movements central to customer costs. The nine month average covers a different period from October's residential rate.

Meralco also reported stronger profits. Consolidated core net income increased 12% to P44.83 billion from P40.02 billion, while third quarter core earnings rose 26% to P18.32 billion. Consolidated reported net income reached P44.68 billion, up 21%.

Revenue grew 19% to P443.04 billion, including P434.97 billion from electricity sales and P8.07 billion from other businesses. Costs and expenses increased 20% to P397.70 billion.

Distribution contributed P20.1 billion, or 45%, of core earnings. Power generation contributed P18.2 billion, or 41%, with its earnings rising 24%. Retail electricity supply and other businesses provided the remaining 14%. Meralco therefore earns across several businesses, while its distribution utility passes electricity procurement charges through to customers.

Investment plans face different currency risks

Meralco maintained its 2026 core earnings target of P56.6 billion. Its nine month result puts it about 79% of the way there, leaving roughly P11.8 billion to earn in the fourth quarter.

The company invested P76 billion during the nine months, mainly in renewable energy, battery storage and improvements to its distribution network. MTerra Solar's first phase began commercial operations in August, adding to the generation business's contribution.

Meralco PowerGen president and chief executive officer Emmanuel V. Rubio said further peso depreciation would have no impact on projects that had already broken ground, while projects yet to start needed watching. Currency exposure therefore differs between an operating electricity network, projects under construction and future developments.

Meralco expects the distribution rate reset to provide greater investment certainty through 2030. Its plans include advanced meters, cybersecurity and network modernization. Head of utility economics Larry Fernandez said proposals to reduce system losses were included, although the company had not identified which projects the ERC approved, reduced or rejected, or given specific reduction targets and timelines.

The distribution business served 8.4 million customers at the end of September, up 2% from 8.2 million a year earlier. Its energy sales reached 41,054 gigawatt-hours, while sales across distribution, generation and retail supply totaled 52,017 GWh.

Meralco also warned that potential El Niño conditions could lift electricity demand. It said it had contracted sufficient supply and was encouraging large customers to join the Interruptible Load Program, under which participants use their own generators or shift operations during shortages, freeing grid supply for others.

Key Points

• Meralco expects peso weakness to raise generation costs because more than half of its power sources depend on foreign exchange.
• October's residential rate rose to P15.0615 per kWh, adding about P64 for a household consuming 200 kWh.
• Higher gas and spot market costs were partly offset by cheaper contracted power, lower grid charges and tax reductions.
• A new residential refund of P0.1733 per kWh starts in November, alongside an expected distribution rate adjustment.
• The size of any further generation rate increase has not been announced.
• Meralco kept its P56.6 billion core earnings target for 2026 after earning P44.83 billion in nine months.