A senior official of the manila Electric Co. (Meralco) admitted the electricity distributor directed power generator Therma Mobile (TMO) to bid out Meralco’s 100 megawatts (MW) at the Wholesale Electricity Spot Market (WESM) for P62 per kilowatt-hour (kWh) when the Malampaya natural gas complex shut down last November.
Meralco director and general counsel Rey Espinosa on Wednesday told the House Committee on Energy the company instructed Therma Mobile to bid the 100 MW for P62 during off-peak hours to prevent the plant’s supply from being used at peak hours.
The Aboitiz-owned Therma Movile is under a short-term contract with Meralco to provide 234 MW of electricity at a cost of P8.65 per kWh. Only 100 MW is ready for distribution, with the remaining available only by mid-2014. Under the contract, Meralco owns the 100 MW.
Espinosa said the decision to auction the 100 MW was an offshoot of the subsequent power plant shutdowns, both forced and planned, in November and December last year.
“We do not want to run that plant during off peak because it is more needed during peak hours. Prices are cheaper if we get supply [from Therma Mobile]during peak hours,” he explained. “When you get power supply to that plant during off peak hours, its price is more expensive compared to WESM.”
Espinosa said they did not expect that the P62 per kWh price will be bought. He blamed on the National Grid Corp. of the Philippines (NGCP) for dispatching it even if there was no supply shortage at that period.
“We did not mean to spike up the prices because we do not know what the prices are. The distribution utility does not see the prices [in the WESM], it just posts the needed supply in the hourly trading,” he said.
“We should ask why the prices were cleared at P62 when the NGCP said it was on white alert and there is an adequate supply,” he said.
Espinosa refuted claims that Therma Mobile’s price bid dominated the electricity spot market when it only comprised 25 out of 888 trading intervals in November and December.
The utility company also blamed the Power Sector Assets and Liabilities Management Corp. (PSALM) for not bidding on Malaya’s 610-MW, which clearly violated the must-offer rule in the spot market.
PSALM Chief Executive Officer and President Emmanuel Ledesma Jr. told the committee it did not allow Malaya to make an offer to avoid operating at a loss of P390,000 to P650,000 per generation hour and unit running.
Last week, Rep. Neri Colmenares of Bayan Muna said Meralco “practically dictated” the price at the WESM through Therma Mobile’s biddings during the Malampaya shutdown, spiking electricity prices.
Comenares said Meralco could have bid out the 100 MW at P0 because technically it is owned by the distribution utility company.
Colmenares said he could not accept Meralco’s explanation, noting that if that was the case the company should not have bid the 100 MW for P62 per kWh 25 times.
“When you [Meralco] make a mistake, it’s your problem and you should be the one who should pay for it. Why would you pass the results of your mistakes to us? The people should not pay for it,” he said.
The Supreme Court stopped Meralco from charging its customers P4.15 per kilowatt-hour more in December last year.
Meralco and other power generation companies are being investigated by the Department of Energy and Energy Regulatory Commission (ERC) for possible collusion to manipulate prices at the spot market.
Rep. Antonio Tinio of ACT Teachers said there was no question Meralco manipulated prices at the WESM through Therma Mobile.
Energy Secretary Jericho Petilla, who also attended the House hearing, said there was sufficient power supply and yet Meralco sought a P4.15 rate increase. The rate hike eclipsed the P2 per kilowatt-hour increase in 2010 when there was a power shortage.
Petilla said the Malampaya plant shutdown from February 10 to March 13 in 2010 led to a power shortage that triggered rotating brownouts. But when Malampaya underwent maintenance from November 11 to December 10, 2013, there was ample electricity supply, he said.
“That is the subject of the ERC investigation and involves a lot of detailed analysis. There’s the must offer policy. Who didn’t comply with such policy? The rate increased because there are those who didn’t offer,” Petilla told reporters after the hearing.
He was referring to the must-offer policy wherein power producers are mandated to offer their services to the WESM when there is shortage.
In 2013, the Malampaya shutdown coincided with the unplanned, extended and forced outages of several power plants.
“Then, there are those who undergenerated [power]. Why [did they]undergenerate? There are so many things to look into and we can’t certainly finish it in one sitting,” Petilla said.
Because of the incident last year, Petilla said his department is considering giving the ERC the authority to intervene in the spot market.
“The ERC should be able to say at some point that, hey, that price is too high. We are looking at administered pricing but at the same time, we also don’t want to make the policy as anti-investor,” he said.