Sunday, February 23, 2014

Energy dep’t insists on lower power rate hike


Business World Online
Posted on February 23, 2014 09:37:37 PM
By Claire-Ann M. C. Feliciano, Reporter

INITIAL RESULTS of the investigation conducted by the Energy department showed that the power rate increase in December would have been lower should generating facilities -- accounting for around 2,300 megawatts (MW) -- were offered in the Wholesale Electricity Spot Market (WESM).

Energy Secretary Carlos Jericho L. Petilla said the law of demand and supply dictates that offering these capacities in the market would have brought down the WESM prices.

However, the WESM prices drove a P4.15-per-kilowatt-hour (kWh) increase in electricity prices in the December billing month.

"We looked at how the market was during that time. It showed that there was tight supply. Around 2,300 MW were not offered in the market, so there were violations in the must-offer rule. That’s anti-competitive behavior," the Secretary said.

"Logic dictates that these are not the proper prices and the proper prices are really lower than this. It will be significantly lower but as to how much, the ERC (Energy Regulatory Commission) will have to decide on that," Mr. Petilla added.

"It’s not P4.15 per kWh but also not zero. The ERC will release the actual price for the December bill soon. Of course, that follows the January billing too because it is under the same circumstances," he further said.

GENERATION COSTS
Mr. Petilla clarified that the price that the ERC will determine will only cover the generation costs from the WESM alone.

"We do not have problems on the generation cost for the liquid fuel, and other contracts of Meralco (Manila Electric Co.). So it will just be the WESM price," the Energy chief said.

Meralco had said last year that WESM accounted for the P2.38-per-kWh increase in its December generation charge, which was at P3.44 per kWh.

The other costs came from its other suppliers.

The natural gas power plants (which shifted to more expensive fuel source due to the scheduled one-month maintenance of the Malampaya gas facility) accounted for P1.04-per-kWh increase, and other suppliers (existing bilateral contracts with power suppliers), which had a P0.02-per-kWh increase.

The P3.44-per-kWh generation charge forms part of the total P4.15-per-kWh increase Meralco was supposed to stagger over a three-month period.

The other components of the rate hike were transmission charge (P0.04 per kWh), taxes (P0.33 per kWh) and other charges (P0.34 per kWh).

Mr. Petilla said that some power generators -- which he refused to identify -- are now being probed by the ERC for violating the rules on trading and dispatch in the WESM during the 30-day maintenance shutdown of the Malampaya gas facility.

"There are more power plants that traded in the WESM but did not dispatch when they were called so that led to the tightness of supply and increase of prices," Mr. Petilla said.

But Mr. Petilla clarified that these power generators will be given time to justify their actions and it would be up to the ERC to sanction them.

"Not offering and dispatching their capacities are violations, but these plants might have valid explanations so we’re going to listen to them," Mr. Petilla said.

In a report submitted to the Supreme Court, the Energy department said that during the Malampaya shutdown -- which ran from Nov. 11 to Dec. 10 last year -- "data gathered indicated that power supply is enough to meet the demand...."

"It should be noted that comparing with the October 2013 billing period, the situation is relatively not different supply- and demand-wise," the report read.

The department said it looked at a comparative market situation in the WESM during selected hours, specifically those time that registered high market clearing prices (MCP).

For instance, the department’s observations showed that in November last year, "there are substantial capacities not offered in the market...."

"This ranges from 1,546 MW to 2,703 MW. During the hour with the highest MCP at 10 p.m. trading interval, the capacity not offered was 2,085 MW, thus the market cleared during the interval was at a very high price," the department report read.

Another scenario illustrated by the department was on Dec. 5 last year, when the state-owned 650-MW Malaya thermal power plant -- handled by the Power Sector Assets and Liabilities Management Corp. -- was noted to be running but "there were more number of intervals wherein the MCPs are high."

The department said there were six times -- which were even on off-peak hours -- when the offered prices were cleared at approximately P62/kWh.

"The capacities not offered range from 2,078 MW (at 10 a.m.) to 3,148 MW (at 2 a.m.). This explains the reason for the high prices because there is significant capacities not offered during the period," the report read.

Copies of the department’s report were furnished to the respondents of the rate hike case before the Supreme Court.

Mr. Petilla said the ERC will be releasing the results of its decision on the actual cost of WESM prices that should’ve been billed in consideration of the tightness of supply.

WELCOMED
An official from Meralco, meanwhile, welcomed the statement of Mr. Petilla.

"We are hoping that they will expedite the findings of the investigation and implement the corresponding and appropriate actions to reflect the true cost of WESM prices covering the [supply] months of November and December," William S. Pamintuan, Meralco first vice-president and head of legal, told reporters on Friday.

The implementation of Meralco’s hefty price increase had been postponed further after the Supreme Court extended the temporary restraining order (TRO) -- issued on Dec. 23 and lapsed on Feb. 21 -- by another 60 days.

The stay order covers the P4.15-per-kWh increase of Meralco for the November supply month, implementation of which was supposed to be staggered in December, February and March billing months.

Meralco, last Feb. 14, also filed a petition before the ERC to recover deferred generation costs amounting to P11.075 billion from consumers starting next month after the Supreme Court clarified that a TRO on the rate increase does not extend to a P4.5606-per-kWh generation charge adjustment supposed to have been billed in January.

Meralco decided to defer the charges in deference of the court’s order since rate hikes in January were also affected by the similar circumstances that raised the December rates.

"It’s a six-month recovery period to cushion the impact to the customers," Mr. Pamintuan had said.

The utility asked the ERC to approve the recovery in stages, starting with an additional P0.844 per kWh to be levied during the March billing period.

Starting April and for the next four months, meanwhile, Meralco wants to implement a P0.7433-per-kWh upward adjustment.

The ERC has yet to decide on the matter.

The Supreme Court, on Feb. 11, ended oral arguments on the rate hike issue after which Chief Justice Ma. Lourdes P.A. Sereno ordered parties to submit in 15 days their memoranda to address issues raised during the hearing.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by Philippine Long Distance Telephone Co. (PLDT). Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld.  source

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