Business World Online
Posted on September 17, 2014 10:57:00 PM
By Claire-Ann M.C. Feliciano, Senior Reporter
MANILA ELECTRIC Co. (Meralco) wants the permanent implementation of a secondary price cap in the Wholesale Electricity Spot Market (WESM), a mechanism that was put in place last May to protect consumers from supply-related volatility.
The distributor manifested its support on this mechanism in a document dated Aug. 29 submitted to the Energy Regulatory Commission (ERC), which was released to reporters yesterday.
Originally planned to be effective only until June, the secondary cap implementation was extended until December as the regulator seeks for a permanent price mitigating measure in the market.
The P6.245 per kilowatt-hour (/kWh) secondary cap kicks in at the WESM once an average threshold of P8.186/kWh is reached over a 72-hour period. Once in place, capacities cannot be sold beyond the price limit.
Meralco said in its position paper that “the WESM secondary cap mechanism was instrumental in shielding customers from high market prices due to multiple and sustained plant outages.”
The distribution utility (DU) said that it observed increasing duration and frequency of power plants’ shutdowns.
“It is during such periods of persistent tight supply that the secondary cap mechanism is activated,” which in turn protects consumers from high power prices due to extended outages.
Meralco also suggested to make the mechanism permanent, noting that “WESM price spikes have historically occurred during plant outages.”
“Clearly, the consumers should not be prejudiced in the form of high WESM prices as a result of these outages that are beyond their control,” it added.
The utility further said that a permanent secondary cap will be a more reasonable measure than requiring DUs to fully contract their power needs.
“To require the DUs to contract 100% of their power supply requirements will necessarily include contracting both for peak and off-peak power requirements...,” Meralco said.
“This will result in the unnecessary payment by consumers of capacity and/or energy that is not being used or is not needed during off-peak hours,” it added.
Meralco also argued that in the event forced outages and scheduled shutdowns overlap, DUs would still have to purchase power from the WESM. “Any suggestion for 100% contracting at this time fails to consider the very tight availability, if not inadequacy, of economical and reliable contractable capacity,” it explained.
The DU instead pushed for the establishment of a mechanism under the secondary cap that would allow proper compensation of peaking plants.
“The provision for additional compensation for specific power plants appears to be reasonable given that the secondary cap may not sufficiently cover the fuel cost and variable O&M (operation and maintenance) of oil-based peaking plants,” it said.
Meralco’s position paper was in response to the ERC’s directive for all interested stakeholders to submit their proposed permanent measures that could replace the secondary cap mechanism.
Public consultations on the issue are scheduled to take place on Sept. 29 and Oct. 15.
Meralco is the country’s largest distribution utility. It provides electricity in Metro Manila, Bulacan, Cavite and Rizal, as well as parts of Batangas, Laguna, Quezon and Pampanga.
Data from the Philippine Electricity Market Corp. (PEMC) showed that the DU accounted for an average of 7% of the total available supply in the WESM from June 2013 to July 2014.
This makes Meralco the biggest buyer based on quantity sourced from the market, according to PEMC.
The WESM currently has a P32/kWh offer limit -- also an interim cap that is almost half of the P62/kWh originally set when the market started operations in 2006.
PEMC is still in the process of determining a final price ceiling that will be used in the market moving forward to replace the current ceiling, which has been in effect since late December last year.
High WESM prices have been blamed for a P4.15/kWh rate hike that Meralco was supposed to start implementing in stages last December.
The adjustment is currently subject to an indefinite restraining order issued by the Supreme Court.
The distributor also sought a P5.33/kWh increase for January but slashed this to P0.45/kWh after PEMC revised WESM prices for the December supply month. The ERC has yet to rule on the revised petition.
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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