Sale of Ilijan power in spot market risky for consumers

By: Ronnel W. Domingo - 05:01 AM October 09, 2017
http://business.inquirer.net/238232/sale-ilijan-power-spot-market-risky-consumers

The Power Sector Assets and Liabilities Management Corp.’s (PSALM) insistence on San Miguel Corp.-run Ilijan power plant to trade on the spot market instead of through long-term supply deals exposes consumers to price volatility, according to SMC president Ramon S. Ang.

Ang said in a statement the state-run PSALM’s mandate was to shield consumers from wild swings in prices and not put them at risk.

He said that, in the first place, the 1,200-megawatt Ilijan plant in Batangas was a baseload power plant intended to run round-the-clock to help address the minimum electricity demand in the grid.

SMC unit South Premier Power Corp. (SPPC) operates the Ilijan plant through an independent power producer administration agreement (IPPA) struck with PSALM in 2010.

“The Ilijan power station is used to continuously supply electricity to the grid including hours when the demand is high,” said Ang, who is also SMC chief operating officer.

“If we sold to the WESM (wholesale electricity spot market), small consumers would have to pay higher electricity bills,” he added. “Even businesses, which are the largest consumer of energy, would suffer.”

Ang said electricity trading at the WESM had seen spikes over the years, resulting in added burden to consumers who shoulder high electricity charges.

The SMC president noted that price volatility at the spot market was especially marked during November and December 2013 when rates reached as high as P15.56 a kilowatt-hour. Spot prices have since gone down to less than P3 a kWh.

Ang was taking issue on “PSALM’s continuing argument that SPPC should have sold its generated power to the WESM” instead of to Manila Electric Co., with which the company has a standing regulator-approved supply agreement.

Ang said PSALM insisted that Ilijan could have optimized revenues by selling to WESM, especially during the price spikes in 2013.

He said PSALM’s position resulted in two different interpretations of the IPPA agreement provisions on how the generation payments should be computed

In an earlier interview, Ang said SPPC honored its contractual obligations under the agreement while PSALM claimed SPPC had P239 billion in unpaid obligations.