ERC okays Meralco’s interim supply deal for Bauang plant

by Myrna Velasco, January 30, 2015
from Manila Bulletin

A regulatory approval has been secured by the Manila Electric Company (Meralco) for its interim power supply agreement (IPSA) on capacity procurement from the 210-megawatt Bauang diesel-fired plant which will potentially yield savings of P0.0922 per kilowatt-hour (kWh) to its customers.

In a calculation that was provided to the Energy Regulatory Commission (ERC), Bauang plant operator 1590 Energy Corporation has noted that without the IPSA, Meralco’s average blended rates during the critical periods of January to July 2015 will be relatively higher at P6.0990 per kwh.

But with the interim power supply deal, the utility firm could also soften impact on its customers at P6.0068 per kWh level.

“With an extension of the term of the IPSA to July 25, 2015, the simulated delivered prices from January to July 2015 would result in an overall cost savings in (Meralco’s) blended generation charge of P0.0922 per kwh,” the ERC ruling has stipulated.

It was further emphasized that the total consequent cost discount to Meralco customers would reach P1.6055 billion.

Tapping additional capacities via short-term power supply agreements had been part of Meralco’s contingency measures to spare its customers from feared rotating brownouts this summer.

“If the IPSA is not implemented during the said period, it would be constrained to source energy from the Wholesale Electricity Spot Market (WESM), which would have been supplied through the implementation of the IPSA,” the ERC Order has stipulated.

In the original IPSA sealed by the parties – which is also the one being extended, the proposed level of Meralco procurement from the Bauang plant could be up to 140 megawatts.

Based on experience during tight supply conditions in the power industry, spot sourcing could also expose end-users to pricing volatilities which generally are on up-ticks on such periods.

The ERC, thus noted, that “there is a paramount necessity for the approval of the extension of the term of the IPSA in order to ensure continuous and reliable electricity for its customers.”

It was emphasized that the “fuel cost to be charged shall be based on the actual cost of fuel incurred, subject to fuel consumption rate of 0.2438 liter per kilowatt hour (kwh)” or based on the actual level of fuel utilization.

Similarly, it was stated that “the start-up and shutdown costs shall be the actual fuel cost incurred per start-up or P209,000, whichever is lower.”

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