Manila Bulletin
By MYRNA M. VELASCO
October 19, 2012, 7:52pm
Given that its extended transition supply contract (TSC) with Manila Electric Company (Meralco) will be expiring this December, the Power Sector Assets and Liabilities Management Corporation (PSALM) has been mulling options of increasing its volume trading at the Wholesale Electricity Spot Market.
“Whatever capacity that we have left in Luzon will be distributed to whatever supply contracts we have remaining and any excess will have to be sold to the electricity market,” PSALM president Emmanuel R. Ledesma Jr. has indicated.
The company does not have exact figures yet as to the volume to be re-allocated to its other TSCs and even the magnitude that will be re-channeled to the spot market.
Nevertheless, if PSALM will not take calculated steps on how it will market or treat its un-contracted capacities, it could be a risky option for consumers as increased spot market exposure could trigger price hikes especially during the summer months.
In anticipation of its contract lapse with PSALM, Meralco has started cornering new power supply agreements (PSALM) with various power generators as early as December last year.
Based on the utility firm’s previous statements, it already sealed power supply deals for roughly 2,000 megawatts of capacity with various power generators. It is also working on another 300 to 500MW supply agreement with San Miguel Energy Corporation’s (SMEC) Sual plant.
More than 40 percent of Meralco’s supply is provided by its contracted independent power producers – namely the First Gen group and Quezon Power Philippines Ltd. Co.
The utility firm has noted that the supply deals will shield its customers from price volatilities and may even bring down pass-on charges to them because the cost of the contracts are lower than what it has been traditionally getting from PSALM, the transferee-firm of the National Power Corporation.
Among the prudent strategies that distribution utilities must adhere to would be covering their supply with bilateral contracts, because failing to do that, could mean higher exposure in the spot market and that may result in unprecedented price hikes, especially during tight supply conditions.
Meralco, for its part, has indicated that if its PSAs would be approved by the Energy Regulatory Commission, the resulting generation cost will be cheaper by P0.50 per kilowatt-hour (kWh), if referenced on June 2012 generation charge.
The initial deals were firmed up with SEM-Calaca of the Consunji group; South Premiere Power Corporation of San Miguel group; and Masinloc Power Partners Co. Ltd. of US firm AES Corporation.
The duration of the contracts will be for seven years or until 2019 and will be renewed on mutual agreement of the parties. (MMV) source
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