Lower power rates seen after ERC probe report

Posted at 03/10/14 9:02 AM

MANILA, Philippines - Energy Secretary Carlos Jericho Petilla expects the Energy Regulatory Commission (ERC), the power regulator, to soon come out with results of its long-delayed investigation on the power rate hike dispute.

Petilla on Friday said the ERC is expected to announce what should have been the electricity rate for December 2013, which should be significantly lower than the P4.15 per kilowatt-hour rate slapped by Manila Electric Co. (Meralco).

“It will probably be lower but there can be room to adjust rates,” Petilla said.

He said that should Meralco disagree with ERC’s rates, it can file a petition with the commission.

However, he stressed that it would be the ERC that would issue a report on the matter.

He earlier said an artificial shortage in power supply caused prices at the electricity market to rise during the one-month maintenance shutdown of the Malampaya natural gas platform.

Capacities not offered in the market ranged from 1,546 megawatts to 2,703 MW, pushing up clearing prices at the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity.

Prices at the spot market are determined by supply and demand and are easily affected if there is a shortage in capacities.

This is among the findings of the Department of Energy (DOE), which conducted its own investigation on why prices went up in the WESM during the one-month shutdown.

The generation charge of Meralco rose last December by P3.44 per kwh to P9.10 per kwh from only P5.67 per kwh in November. This translated to an actual electricity rate of P4.15 per kwh in December, which is currently the subject of a temporary restraining order (TRO) issued by the Supreme Court.

To prevent similar situations in the future, Petilla recommends requiring power plants to declare their available generating capacities to ensure there is no withholding of capacity.

This after the energy department’s own investigation into the disputed power rate hike last year showed that supply tightened after some power plants withheld some of their capacities, resulting in a shortage of some 2,300 megawatts.

In a report it submitted to the Supreme Court, the energy department said there is an urgent need to have a regular updating of the status of all generating units to ensure that there is no withholding of capacity.

The DOE noted for example that the registered capacities in the Philippine Electricity Market Corp. (PEMC), which operates the WESM, are based on figures reflected in the certificate of compliance issued by the ERC, and is good for five years.

Over time, these capacities may no longer be accurate and there is a need to test them for de-rating to be able to reflect the true capacity, the DOE said in its report.

In its report, the DOE also recommended a review of the power supply agreements of Meralco to ensure that these contracts should have provisions of “least cost” replacement power during times of outages of power suppliers.