Cusi wants to prevent pass-on of ‘force majeure costs’ to consumers

Published May 11, 2017, 10:00 PM By Myrna M. Velasco

http://business.mb.com.ph/2017/05/11/cusi-wants-to-prevent-pass-on-of-force-majeure-costs-to-consumers/

Energy Secretary Alfonso G. Cusi is engaging industry regulators on the enforcement of a policy that shall prevent pass-on of force majeure costs when power plant outages and supply tightening happen in times of calamities.

The energy chief indicated that he already had preliminary discussions on this with the Energy Regulatory Commission (ERC) as well as with some of the industry players.

In other industries, he cited that when the country or some areas are afflicted with calamities, price freeze on basic commodities as well as the cost of petroleum products would often be implemented.

Cusi said he wants “the same done to the electricity sector…we don’t have to unduly burden the people with higher power costs when there are calamities.”

He said it would be highly insensitive for the disaster-stricken segment of the population to bear additional costs in their power bills when they are already suffering either socially or economically from the impact of a tragedy.

Cusi admitted though that this policy proposition is a matter that he has yet to flesh out – including its legal anchor – with the ERC, the operator of the Wholesale Electricity Spot Market (WESM) and the players of the various sub-segments of the electric power industry.

The energy secretary was prompted on this cost pass-on dilemma when earthquake incidents swarmed Batangas last month.

An aftermath of that cataclysm had been forced outages of several power plants that triggered tightening in power supply – which in turn, ignited price spikes in the spot market.

Another facet that the Department of Energy (DOE) has been probing is the “bit of inefficiency” that power generators had been incurring in their operations.

Cusi noted that while their power supply agreements (PSAs) set prescription on allowable outage allowance, he surmised that this has been emerging as “convenient cover” for some power plant operators to just turn a blind eye on achieving utmost efficiency in running their facilities.

The department, according to the energy chief, will have to examine the operation reports of power plants so they can evaluate which incidents and events are really “unavoidable but technically-acceptable outages” and which ones are due to “inefficient operational practices.”

For instance, the DoE noted that every time coal-fired power plants would suffer forced outages, “boiler tube leak” is always the psyched up answer provided by plant operators – although it was learned that such incidents are almost ‘unheard of’ in other power markets such as in Japan.

The energy chief stressed that there are costs to “inefficiencies” in power facilities’ operations and they add up to the country’s exorbitant electricity rates, hence, it is high time that the government does something to pull the plug on such industry practices.