Finger pointing on power rate hike

MANILA, Philippines - It was a blame game at the Senate hearing on power rates yesterday as power firms and energy officials accused each other of not doing enough to prevent a drastic rise in electricity rates.

Officials of the country’s biggest power distributor Manila Electric Co. (Meralco) said rates would not have skyrocketed had the government dispatched its 650-megawatt Malaya thermal power plant in Rizal.

Energy officials, however, said the government did not run the facility early on because it was not necessary.

The Power Sector Assets and Liabilities Management Corp., the owner of the power plant, said system operator National Grid Corp. of the Philippines (NGCP) did not call on PSALM to dispatch the Malaya facility.

“NGCP is the one who determines dispatch. My understanding was the supply was sufficient. NGCP never mentioned anything to us with regard to insufficiency of supply,” PSALM president Emmanuel Ledesma Jr. said during yesterday’s hearing by the Senate committee on energy.

The Senate committee is looking into Meralco’s record increase in its December generation charge of P3.44 per kilowatt-hour, which the Supreme Court suspended for 60 days on Dec. 23.

Meralco attributed the record hike to the use of more expensive diesel fuel by Luzon power plants as a result of the month-long scheduled maintenance shutdown of the Malampaya power plant and the unplanned shutdown of other plants.

NGCP, for its part, stressed that during the Malampaya shutdown from Nov. 11 to Dec. 10, there was actually no shortage in supply.

“During the Malampaya shutdown there was no shortage of electricity. We have sufficient reserves,” said Robert Dylan Concepcion, NGCP’s assistant corporate secretary.

“As indicated earlier, the supply capacity during the period Nov. 11 to Dec. 10 was sufficient. There was no deficiency in the system. In that period, there was sufficient capacity,” Raul Saludo, head of NGCP’s system operations for Luzon, also said during the hearing.

Ledesma explained that PSALM eventually dispatched the Malaya plant upon NGCP’s advice but power sellers said the move came too late.

“Had Malaya been dispatched (earlier), it’s our assessment that the P62 per kilowatt-hour would not be reached,” said Meralco president Oscar Reyes during the hearing.

Reyes was referring to Meralco’s bid of P62 per kwh in the Wholesale Electricity Spot Market (WESM), which was cleared by the market operator as the settlement price.

The WESM is the country’s trading floor for electricity.

“There is an analysis of the behavior of the WESM, if Malaya was online and offered during the Malampaya shutdown, the WESM average price Nov. 11 to Dec. 10 would have gone down by as much as 70 percent from P21 per kwh to about P5 per kwh,” Reyes said.

However, Ledesma maintained that NGCP did not order Malaya’s dispatch until Dec. 2. Thus, the facility operated only from Dec. 2 to 10, or too late to arrest the surge in generation rates.

Compliance with rules

In a statement, the NGCP said it was only complying with electricity market rule stating that only plants included in the real-time dispatch schedule would be considered “must run units” and put online.

“During the maintenance shutdown of the Malampaya gas facility from Nov. 11 to Dec. 10, 2013, the real-time dispatch did not include Malaya thermal power plant.

“Records show that supply during that period, as provided by WESM, was enough and that there was no system condition (e.g. voltage problem) that would trigger the call for must run units,” NGCP said.

The NGCP said designating a generating unit as an “must run units means that the power plant would be put online to ensure enough supply is given Malampaya during the period.

“Per records, even during the Malampaya shutdown, there was supposedly enough supply available in the Luzon grid,” it said.

It stressed it “could not have called Malaya as an “must run unit” since per technical considerations, there was no grid situation that would require NGCP to call Malaya.”

Lawmakers, meanwhile, grilled NGCP and energy officials on the late use of the Malaya facility.

Senate energy committee chairman Sergio Osmeña III asked NGCP to explain why it issued only one yellow alert on Nov. 15. A yellow alert indicates tight supply but not necessarily power outages.

“You only issued one yellow alert and yet the prices were high. There were days when the price reached the maximum cap of P62 per kwh,” Osmeña said.

NGCP’s Concepcion said there was no danger because supply was sufficient, based on records.

PSALM’s Ledesma also said that running the Malaya facility would have cost the government corporation up to P1.35 billion for a 31-day period. This would have hiked the universal charge, he added.

This was the reason why PSALM submitted a bid of P45 per kwh when it traded in the WESM, he said.

Ledesma also said that prices at WESM remained high even with the Malaya plant online.

Energy Secretary Carlos Jericho Petilla, for his part, said the Malaya facility runs when NGCP calls it.

“Malaya’s behavior since five years ago has been the same,” he said.