Ang asks Psalm to act against volatility of spot-market prices

By Lenie Lectura - October 8, 2017
https://businessmirror.com.ph/ang-asks-psalm-to-act-against-volatility-of-spot-market-prices/

BUSINESSMAN Ramon S. Ang urged the Power Sector Assets and Liabilities Management Corp. (Psalm) to protect consumers from volatility of spot-market prices and not expose them.

Ang issued his statement as Psalm “continues to argue” that San Miguel Corp. (SMC) unit South Premiere Power Corp. (SPPC) should have sold its generated power from the Ilijan power plant to the Wholesale Electricity Spot Market (Wesm), instead of the Manila Electric Co. (Meralco).

SPPC is the independent power producer administrator (Ippa) of Ilijan. Ramon S. Ang, SMC president and COO, said Psalm’s insistence on trading the output of the 1,200-megawatt (MW) Ilijan power plant on the spot market is “a blatant disregard for the welfare of power consumers who should be shielded from, and not exposed to, its price volatility”.

Ang added Ilijan is a base-load plant, thus, its output must not be traded in the Wesm to protect consumers.

“The Ilijan power station is used to continuously supply electricity to the grid, including hours when the demand is high. If we sold to the WESM, small consumers would have to pay higher electricity bills,” he said. “Even businesses, which are the largest consumer of energy, would suffer.”

Psalm had said that SPPC should have sold its generated power to the Wesm especially during the contested period of November and December 2013, which could have optimized revenues from the high prices. This stance resulted in two different interpretations of the IPP administration agreement provisions on how the generation payments should be computed.

While the Psalm claims SPPC has unpaid obligations, the latter said it honors its contractual obligations under the agreement. SPPC said it has already paid P239 billion, representing energy fees and capacity fees, to Psalm as of August. For the same period, the Psalm has also gained P30 billion from its administration agreement with SPPC, the company said.

The SPPC has an existing power-supply agreement (PSA) with Meralco that was approved by the Energy Regulatory Commission (ERC) in 2012 for 1,180-MW capacity from the Ilijan plant.

The ERC, in its approval of the PSA between Meralco and SPPC, said the approval will ensure continuous and reliable supply of electricity to Meralco’s customers and will minimize, if not avoid, its exposure to volatile prices in the WESM. The proposed rate is also lower than the rate under the National Power Corp. transition supply contract.

The Psalm earlier terminated the Ilijan Ippa for alleged nonpayment of generation charges that it computed using Wesm rates instead of the ERC-approved rates. SPPC eventually filed a complaint against Psalm due to willful breach of contract, resulting from a flawed interpretation of certain provisions related to its generation payments, under the administration agreement.

Meralco, in its intervention to the case against the Psalm, said the termination of the Ilijan Ippa “will prevent it from purchasing electricity from SPPC. Consequently, Meralco will lose 1,180 MW of electricity supply from Ilijan under the terms of the ERC-approved Meralco-SPPC PSA, which provides cheaper electricity to Meralco’s end-users.”

It added “Meralco will have to purchase electricity from the Wesm to cover for the lost 1180 MW worth of electricity, which will expose Meralco and its end-users to the price volatility of the market.”

The Meralco PSA with SPPC covers 18.74 percent of its peak power requirements in its franchise area amounting to at least 2.7 million households with 200 kilowatt-hour consumption a month.

“This is a huge volume that has a great impact in bringing cheaper electricity to the public. Psalm’s act in terminating the Ilijan Ippa threatens to remove this benefit from the public. If Meralco is prevented from purchasing power from the Ilijan plant, this will thwart its efforts in bringing down the electricity cost for its end-users causing serious and irreparable damage to Meralco and its consumers,” Meralco earlier said.