Rise in coal, gas prices pulling up electricity rates again

Published November 4, 2017, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2017/11/04/rise-in-coal-gas-prices-pulling-up-electricity-rates-again/

Rising fuel prices in the international market – primarily for coal, oil, and natural gas – had started pulling up average electricity rates again, according to power utility giant Manila Electric Company.

Inherently, the utility firm noted that such factor had already driven up generation charge in the power rates component by 5.0-percent in the first nine months to P4.30 per kilowatt hour (kWh) from the year-ago level of P3.87 per kWh.

That five-percent rise in generation cost, with it accounting for the hefty share of the rates being billed to consumers, had generally raised power prices to P7.93 per kWh or 5.0-percent higher than the average of P7.53 per kWh last year.

Data provided by Meralco has shown that the average price of coal per metric ton in the world market had inched up to US$83.71 compared to the softer level of US$56.40 per MT in 2016.

For natural gas, in which the Malampaya gas field’s production pricing had been indexed internationally, it was already higher at US$7.11 per gigajoule (GJ) this year from US$6.17 per GJ on average in 2016.

Oil prices, despite the snappy stance of many global oil producers on what they deem as slow uptrend, had also been higher this year at US$51.09 per barrel average from the year-ago level of $38.98 per barrel.

The depreciation of the Philippine peso against the US dollar was also observed to be adding pressure to the rates. Prices in the Wholesale Electricity Spot Market (WESM) had remained relatively low at P4.34 per kWh average in this year’s nine months.

But more than the rates being on their way up again, the utility firm has also been constantly voicing out concerns on probable more pressing concerns of supply reliability and longer term energy security of the country.

The utility firm sounded off that erratic power supply could be a damper to potential flow of foreign direct investments, primarily the power-intensive manufacturing sector that will supposedly satisfy the base of industrialization goals of the Duterte administration.

Meralco Senior Vice President Alfredo S. Panlilio, who is also the company’s head for customer retail services and corporate communications, noted that “every time there’s a yellow alert or red alert, we trigger ILP (interruptible load program), and that’s a signal to the customer that there’s a problem.” The ILP program enjoins entities with self-generating assets to switch on these because grid supply may no longer be enough to meet all customer-segments’ electricity service requirements.

The Meralco executive added when such incidents happen, investors get perturbed, hence, “stability of power supply is always a concern especially for the big commercial and industrial customers – although, not much for residential. But still, it affects the economy, just on the perception that there is a shortage in supply.”

Panlilio indicated “if there are plans for certain companies in the Philippines to expand, then they will think twice, if is this is a place where we can rely on for expansion? It’s very critical that we do address the supply problem, even though it does not end up in brownouts at times, when you trigger a ‘yellow alert’ it sends up an alarm.”

He thus noted that “what follows those alarms could be a fire, and eventually they might turn into red alerts and you’ll have massive blackouts and we don’t want that.”