Petilla admits Psalm may have violated WESM rules

Business Mirror

11 Feb 2014 

 

Written by Joel R. San Juan and Lenie Lectura

ENERGY Secretary Carlos Jericho L. Petilla admitted on Tuesday before the 15-man High Tribunal that the Power Sector Assets and Liabilities Management Corp. (Psalm) may have violated Wholesale Electricity Spot Market (WESM) rules, particularly on so-called anti-competitive behavior.

At the continuation of the oral arguments on the petitions seeking to scrap the P4.15-per-kilowatt-hour (kWh) power-rate increase of the Manila Electric Co. (Meralco), Petilla admitted during questioning by Associate Justice Marvi Leonen on Malaya Thermal Power Plant’s failure to dispatch its energy load in November which could have prevented the spike in Meralco’s electricity rates.

Leonen initially asked Petilla what does it mean when a plant is on an open breaker status.

Petilla explained that “the open breaker status means that the [power plant] made an offer but when asked to dispatch it wasn’t able to dispatch.” In the case of Malaya, which was under open breaker status, it made an offer it was unable to deliver.

“It is not legal and it has been repeated by Psalm so many times” he said.

Petilla said the reason given by Psalm is that it really cannot start and that the only way it can actually dispatch is if it runs the entire plant without turning it off.

“If they run 24 hours their problem is they’re going to run out of fuel,” Petilla said.

Petilla was invited to the proceedings to lend “technical expertise” to the issues surrounding the power-rate increase and assist the High Court in explaining these technical issues.

It can be recalled that during an inquiry in the lower House, it was revealed that Psalm, which controls the Malaya thermal power plant with a 600-megawatt (MW) capacity, did not make an offer to counter the P62-per-kWh posting during off-peak hours.

Malaya, whose role is to dispatch its energy load in the spot market, did not do so, resulting in the P62-per-kWh generation charge that led Meralco to charge an additional P4.15 per kWh in generation charges.

The generation charges went up due to the P62-per-kWh spot-market quote on electricity that became the basis for the energy prices.

The government also defended before the Supreme Court its approval of Meralco’s record-high power increase.

Proper remedy

Assistant Solicitor General Vida San Vicente, who represented the Department of Energy (DOE) in the case, asked the High Court in oral argument to dismiss the petitions assailing the record-high rate hike for being premature.

“Petitioners did not avail of the proper remedy. It is respectfully submitted that petitioners should have contested before the ERC [Energy Regulatory Commission] the automatic adjustment of the November 2013 generation cost under Section 43 of the Epira [Electric Power Industry Reform Act],” the government counsel to the justices.

San Vicente stressed that petitioners failed to exhaust available administrative remedy with the ERC, which has jurisdiction over all cases contesting rates, fees and penalties imposed also on cases involving disputes between and among participants in the energy sector.

She also rebutted the allegation of petitioners that the DOE and ERC committed grave abuse of discretion in approving the rate hike without publication of the adjustment in generation cost.

The government counsel argued that the requirement of publication under Section 4 (e) Rule 3 of Epira law does not apply as exemption is provided by the Automatic Adjustment of Generation Rate (Agra) rules.

“Under the Agra rules, the adjusted generation cost was automatically computed using a prescribed formula without need of ERC verification and confirmation,” she explained.

San Vicente also contested the allegation that DOE violated constitutional provision on due process. She told the High Court there was a review of the supply contract and that the determination of generation cost went through an evaluation process through notice and hearing.

“The safeguard is a rate-fixing process, hence, due process is observed,” she pointed out.

‘Must-run unit’

The DOE has approved the request of the Psalm to convert the 650-MW Malaya thermal power plant into a “must-run unit” in case of power-supply shortage in Luzon in the coming summer months.

 “Yes, we approved it. Since this is a Psalm asset that is up for privatization, while there are no takers, Malaya is best used as a must-run unit,” Petilla said.

 Psalm wants Malaya exempted from the “must-offer” rule and formally declare Malaya as must-run unit only. The power facility has been designated as a “must-offer unit,” which means that the government, being the owner of the said power plant, should offer Malaya’s output to the WESM.

 The exemption takes effect two weeks from February 8, or until such time that Malaya has been disposed of by Psalm.

A power plant that is designated as a must-run-generating unit means that Malaya, in this case, must be put on online to ensure enough supply.

 At the time when the Malampaya gas facility was placed on a maintenance shutdown from November 11 to December 10, 2013, the National Grid Corp. of the Philippines (NGCP), which is responsible for overseeing the supply, said there was adequate supply in Luzon. As such, it said, there was no need to deploy Malaya power plant as a must-run unit.

 In a news statement, NGCP said only plants included in the real-time dispatch schedule would be considered must-run units.

 “Records show that supply during that period, as provided by WESM, was enough, and that there was no system condition that would trigger the call for must-run units,” NGCP had said.

 The Malaya power plant was put on economic shutdown and not on maintenance shutdown because Psalm sees it as a losing proposition had the facility participated in the WESM.

 Petilla said last week that the DOE would run the Malaya thermal power plant from March to August this year to help augment power supply in Luzon, which faces tight or thin reserves during summer. He added that the Malaya plant can generate at least 150 MW and a maximum of 610 MW.   source