A week after the Energy Regulatory Committee (ERC) voided the high wholesale power prices in November and December 2013, the Philippine Electricity Market Corp. (PEMC) found that the rate adjustments imposed by the Manila Electric Co. (Meralco) late last year were, indeed, excessive.
After reviewing the computations of the regulated prices for the two supply months, the PEMC said the average price rate on the spot market in November should be P6.007/kWh instead of P25.404/kWh and P6.24/kWh for December, not P28.367/kWh.
If the recalculated rates are followed, the P4.15 per kWh increase that Meralco wanted to collect starting in December last year should be lowered to P2.43 per kWh, and the P5.33 per kWh rate hike for the January 2014 billing should only be P3.02 per kWh, the PEMC said.
The Supreme Court (SC) stopped Meralco from implementing the rate hike after several groups questioned the record increase at the tribunal. But PEMC President Melinda Ocampo said Meralco will determine the final rate adjustments that it needs to charge its customers, subject to approval by the ERC.
Ocampo said her agency will submit its report to the ERC.
Last week, the ERC voided the power rates seen on the spot market late last year, saying they were excessive. It directed the PEMC, the operator of the Wholesale Electricity Spot Market (WESM), to calculate and implement the regulated prices in the revised WESM bills of the affected distribution utilities in Luzon. However, the ruling did not cover Meralco because of the temporary restraining order issued by the High Tribunal on the utility firm.
Larry Fernandez, head of Meralco’s Utility Economics, said the company will consult the ERC on the proper computation of the new rates.
Energy Secretary Jericho Petilla said there was a huge discrepancy between the rates imposed during the months when the Malampaya plant was shut down, and the regulated rates.
“The recalculated rates show a big gap [with the previous rates],” he told reporters on the sidelines of the Philippine Economic Forum held on Tuesday. He said Meralco’s price hikes should be lower.
Meralco had claimed that its price adjustment, the highest in history, was a result of high electricity rates on the spot market.
It said the cost of power shot up when the Malampaya natural gas plant was shut down for its annual scheduled maintenance.
The ERC said there was a “market failure” during those months because several power producers violated the “Must Offer Rule” (MOR). Under the Electric Power Industry Reform Act (Epira), power generators are required to offer all of their available capacity on the market to prevent an artificial shortage of electricity, which could spike up prices.
“The dispatch schedule and the prices during the November and December 2013 supply months reflected an inefficient allocation of resources contrary to the aspirations of WESM.
This was brought about by the tight supply condition arising from the participants’ failure to abide with the MOR,” the ERC said.
For the coming summer months, Petilla said power supply will be tight because demand will be higher and several plants that provide power in Luzon will be shut down for scheduled maintenance. He said electricity rates may eventually go up.
The Ilijan plant of Kepco Philippines Corp., will only be able to provide 600 megawatts instead of 1,200 megawatts. The San Lorenzo power plant of First Gas Power Corp., which produces 500 megawatts, will be out for upgrade from April 9 to May 16.
Also on Tuesday, Malacañang criticized Meralco for warning that power rates may again go up because of tight supply.
“Instead of drawing scenarios that tend to sow fear, it is better to focus on positive steps like what the government is now undertaking to ensure stability of supply and ensure that there will be no power outages. That is the focus of government,” said Presidential Communications Secretary Herminio Coloma Jr.
The Palace official reacted to the warning of Meralco Chairman Manuel Pangilinan that tight supply might trigger price spikes on the spot market that would be passed on to consumers.
“There is a perceived, if not acceptable, narrowing gap between reliable capacity and growing market demand, aging generating plants and increasingly severe climate changes,” Pangilinan said on Monday.
Other Meralco officials said that this summer, several plants are scheduled to go offline for maintenance.
Pangilinan and other Meralco officials likened the possible hikes to the situation in October to December last year when spot market prices rose following the scheduled shutdown of the Malampaya natural gas facility. The problem was compounded by the shut down of other plants.
Coloma dismissed claims of tight supply.
“Luzon and Visayas have enough supply. There is no tightness of supply in Luzon and Visayas compared to Mindanao,” the official stressed.
“If there is stable power supply, we will not have unusual spikes on prices. That is why the government is tightly monitoring the situation, which is very dynamic. It is not static. DOE [Department of Energy] monitors it hourly,” Coloma added.
The Palace spokesman also advised the public not to worry about Meralco’s statements because the government is doing everything to ensure steady supply of electricity.
“We are not alarmed by those reports. We need to bear in mind that we are doing everything [and]players in the power industry are doing their part to have enough supply,” he said.
The DOE, according to him, has been tasked to closely monitor developments in the sector not only in Luzon but all over the country. He said the Energy department has been keeping tabs on the performance of base load plants and their peak loads.
This helps the government determine the “augmentation” efforts that should be done.
“Monitoring is on a 24-hour cycle . . . It is possible to have a balance perspective that will not result in baseless fears or public discomfort,” Coloma told reporters.
He also called on power industry players to help government prevent power outages.
“Instead of talking about what’s lacking, why not focus on how to have enough, right?” he asked.
Coloma said the Malaya plant is being readied for commissioning as part of preparations for the onset of the summer season when demand for electricity is expected to shoot up.
“The DOE continues to monitor the power situation nationwide to ensure stability of supply and electric power rates, especially during the summer months. Government is exerting maximum efforts to prevent power outages or brownouts,” he said.
But observers noted that even with the Malaya plant running, prices of electricity may still spike because besides being “slow,” the plant runs on the more expensive diesel fuel. These were the reasons why the plant was ordered shut down.
Petilla has said the government was prepared to run the Malaya plant for up to 70 days to boost supply during the hot months.