ERC approves Meralco Ipsas with 3 power producers

by Lenie LecturaApril 22, 2016

from Business Mirror

The Energy Regulatory Commission (ERC) has approved the power-supply contracts between the Manila Electric Co. (Meralco) and three power producers, giving the utility firm more flexibility in sourcing its power requirements, especially in situations when demand is high that would pull up electricity cost.

“Per records of the commission, Meralco received on April 15, 2016, the commission’s letter informing them that the three interim power-supply agreements [Ipsas] they have filed are approved, subject to certain conditions,” ERC Spokesman Rexie Digal said in an interview.

Meralco signed separate Ipsa with Toledo Power Corp. (TPC), Panay Power Corp. (PPC) and 1590 Energy Corp. in January.

However, these contracts need to be approved by the ERC before they can be implemented.

Under the agreements, the TPC will supply Meralco up to 28 megawatts (MW) from 10 a.m. to 9 p.m., from Monday to Saturday, until the contract expires on February 25, 2017. PPC, meanwhile, will sell up to 45 MW to Meralco from 10 a.m. to 9 a.m., from Monday to Saturday.

The Ipsa between Meralco and PPC will also expire on February 25, 2017, unless terminated earlier or extended.

The PPC owns and operates a 72-MW diesel-fired power plant in La Paz, Iloilo City. The TPC, meanwhile, owns and operates a 40-MW diesel power plant in Toledo City, Cebu.

Meralco also signed a similar agreement with 1590 Energy Corp.  The Ipsa states that Meralco will source 170 MW from the plant powered by bunker oil from February 26 to July 26, 2016, from 10 a.m. to 9 p.m., from Monday  to Saturday.

Besides this, Meralco may also opt to source up to 170 MW from the same power plant from July 26, 2016 to February 25, 2017, during the same schedule.

1590 operates and manages the energy output of the 215-MW bunker-oil-fired diesel-engine power plant in Bauang, La Union.

Meralco, for its part, said the Ipsas would give flexibility to optimize its sourcing of power. “This is especially true during period of high demand and tight supply, when there is pressure for spot-market prices to increase,” Meralco Head for Utility Economics Lawrence Fernandez said in an interview.

Meralco, in its applications, said it must immediately implement these Ipsas “to reduce the company’s WESM [Wholesale Electricity Spot Market] purchases, and protect its customers from forecast high WESM prices, to help ensure reasonable prices for such customers, especially during the summer months of 2016.”

WESM is the country’s trading floor for electricity, where distributors are exposed to volatile prices, as demand and supply drive power costs.

If the Ipsas are not implemented during the said period, Meralco will be constrained to source from the WESM where prices are volatile, especially during the summer months, Meralco said, adding that this can be further aggravated and would likely result in higher WESM prices in light of the very tight supply under thin reserve-margin conditions during the said period.

Meralco said the Ipsa with PPC and TPC would result in an overall savings of P0.0074 per kilowatt-hour (kWh) and P0.0003 per kWh, respectively.

Meanwhile, savings from the Ipsa between Meralco and 1590 is expected at P0.0541 per kWh.