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Meralco rates going up amid demand, outages

Power rates of Manila Electric Co. will likely go up this month amid increased demand, plant outages, and the Malampaya gas supply restriction, a company executive said over the weekend.

“For October rates, there is pressure for generation costs to go up. Demand in September increased versus August. In fact, September 2020 peak demand was higher than September 2019’s,” Meralco head of utility economics Lawrence Fernandez said.

He said it was the first time that power demand increased on a year-on-year basis since the start of the pandemic.

“The higher demand was coupled with more generation plant outages and a Malampaya gas supply restriction,” Fernandez said.

The Meralco official said prices at the Wholesale Electricity Spot Market, the country’s trading floor of electricity, reached P32 per kilowatt-hour on Sept, 5, and 7, while prices for the rest of September remained higher than in August.

The Independent Electricity Market Operator of the Philippines, the operator of WESM, earlier said average power rates were expected to rise as more power plants went on planned and unplanned outages in the first two weeks of September.

“There were multiple price spikes due to thin supply margin due to planned and forced outages of major plants and at the same time, demand has been going up, it reached 12,586 MW on Sept. 8, 2020, which is so far the highest since July 2020,” John Paul Grayda, IEMOP manager for trading operations department, said.

“Given that there were a lot of price spikes for the month of September, we expect that the rates for September is somehow higher as compared to previous months,” Grayda said.

Meralco’s overall power rate went down by P0.0623 per kilowatt-hour to P8.4288 per kWh in September from P8.4911 per kWh in August.

Meralco’s generation charge went down by P0.0381 per kWh to P4.0860 in September from P4.1241 in August as the power retailer continued to impose its force majeure claims.

Force majeure represents reduction in fixed costs from baseload supply contracts and avoided charges from the temporary suspension of mid-merit contracts recently approved by the Energy Regulatory Commission.

The company said that because of the reduced power demand in its service area during the community quarantine period, it continued to invoke the force majeure provision in some of its power supply agreements.

Meralco’s force majeure claim totaled about P463 million in September, equivalent to customer savings of P0.1710 per kWh in the generation charge.

Meralco said that without the force majeure claims, the generation charge and the total rate would have increased by P0.13 and P0.14 per kWh, respectively. For the past six months, the savings from force majeure claims reached P2.4 billion.

Meanwhile, Senator Win Gatchalian urged the Department of Finance to provide sufficient budget and spare taxpayers from being choked by new borrowings to fund next year’s obligations of the Murang Kuryente Act.

Gatchalian learned that less than 20 percent or only P8 billion of the P46 billion requested by the Power Sector Assets and Liabilities Management Corporation in their 2021 budget was allocated by the DOF for next year’s implementation of the Murang Kuryente Act.

As a result, PSALM will have to resort to borrowing for the additional P38.4 billion and taxpayers will bear the brunt of covering the P5.45 billion borrowing cost, the senator was told during the recent budget deliberations of PSALM’s 2021 budget.

“That is not the spirit and intention of the law. We have to request the DOF to seriously look into this because the P5.45 billion is a hefty amount. If we will be incurring additional costs then it will still be passed on to the taxpayers because PSALM will need to borrow,” the Senate Energy Committee Chairman said.

“The law intends to save interests and borrowing costs but obviously that is not happening in this case,” he added.

The Murang Kuryente Act spares consumers from paying the universal charges for stranded contract costs and stranded debts in their electricity bills. But each household is still paying P0.0428 per kilowatt hour for UCSD that should be removed, according to the senator.

The stranded contract costs are the excess of the contracted cost of electricity under eligible independent power producer contracts over the actual selling price of the contracted energy output while stranded debts are those unpaid financial obligations of the National Power Corporation which have not been liquidated by the proceeds from the sales and privatization of its assets.

“Consumers will not see it in their electricity bill. But indirectly, it’s also the taxpayers who will be paying an additional P5.45 billion through one way or the other. You can always argue that it’s one pocket to the other,” Gatchalian said.

In a related development, the Power for People Coalition said Wednesday that it welcomes the moratorium on the Department of Energy endorsements for greenfield coal power plants.

“But we have reservations on how it would affect power rates as the country seeks to recover from the coal pandemic,” they said in a statement.

They said the long-term benefits of coal would be complemented by decisive action on the part of the government to also address the short-term effects of the bill shock which happened during the enhanced community quarantine period.

Only with concrete action on both the short-term and long-term can the DOE begin to truly say it is “prosumer,” they said.

For their part, Avril De Torres, Research, Policy, and Law Program Head, of the Center for Energy, Ecology, and Development (CEED) said:

“We are thrilled by the Department of Energy’s declaration of a moratorium on endorsing new coal plant applications. This long overdue pronouncement would block off at least 10.7 GW of coal in the pipeline and can be the gateway for a future where all Filipinos are given access to clean and affordable energy. However, the DOE cannot not stop here. If it is to make up for the years it stood by its so-called ‘technology-neutral’ policy, it has to following up with phase-out plans for the currently installed 9.8 GW of coal in the country. Without this, the suffering of coal-affected communities, soaring electricity prices, and fossil fuel pollution would continue to proliferate.”

The DOE said it will no longer endorse new coal power plant projects.

Based on a recent review on the country’s power mix, the agency said there is a need to declare a moratorium on endorsements for greenfield coal power plants.

DOE Secretary Alfonso G. Cusi said the periodic assessment of the country’s energy requirements revealed the need for the country to shift to a more flexible power supply mix.

This move, he said, would help the country build a more sustainable power system that will be resilient in the face of structural changes in demand and will be flexible enough to accommodate the entry of new, cleaner, and indigenous technological innovations.

DOE Undersecretary Felix William Fuentebella said the moratorium would not cover those in the agency’s indicative list of coal power projects. “We are referring to new ones,” he said.

At the same time, Cusi said the Philippines is now allowing 100-percent foreign ownership in large-scale geothermal exploration, development, and utilization projects. Large-scale geothermal projects are those with an initial investment cost of about $50-million capitalization through Financial and Technical Assistance Agreements (FTAAs).

FTAAs may be entered into between foreign contractors and the Philippine government for the large-scale exploration, development, and utilization of natural resources, and are signed by the President.

This was announced by Cusi during the 2nd Global Ministerial Conference on System Integration of Renewables, which was held as part of the Singapore International Energy Week 2020.

“While we have initially embraced a technology-neutral policy, our periodic assessment of our country’s energy requirements is paving the way for innovative adaptations in our policy direction,” Cusi said.

The moratorium on the endorsements for greenfield coal power plants and the opening up of the country’s geothermal sector to greater foreign investments in order to boost the prospects of the local renewable energy (RE) landscape are but among the innovative policies that the DOE will be implementing.

Topics: Manila Electric Co. , Malampaya gas supply , Lawrence Fernandez
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