Expect another power-rate increase

by Lenie Lectura, February 18, 2015
from BusinessMirror

The 30-day shutdown of the Malampaya natural-gas facility will definitely increase power rates by at least P1 per kilowatt-hour (kWh), a group of power producers and the country’s largest distribution utility firm said on Wednesday.

“I guarantee that there will be a spike, because that happens whenever Malampaya shuts down,” said Luis Miguel Aboitiz, president of the Philippine Independent Power Producers Association Inc. (Pippa), during a discussion organized by GE Philippines.

The Malampaya gas facility, which currently provides over 40 percent of the country’s energy needs, will undergo a maintenance shutdown from March 15 to April 14.

The Luzon grid is dependent on Malampaya, as it fuels three power plants: Santa Rita 1,000 megawatts; San Lorenzo, 500 MW; and Ilijan, 1,200 MW. The Santa Rita and San Lorenzo power plants are owned by Lopez-led First Gen Corp., while Ilijan is owned by Kepco Philippines. They will have to shift to liquid fuel to fire up their power plants during the 30-day period.

“Once the gas plants shift to liquid fuel, there’s around P1-per-kWh automatic increase,” said Aboitiz, who was referring to a spike in generation charge, the largest component of an electricity bill.

This was echoed by Meralco Vice President and Head of Utility Economics Lawrence Fernandez, who said the rate hike “of about P1 per kWh depends on the prices of fuel during that period.”

“So that’s during the March-to-April supply period that will be reflected in the April to May billing periods,” Fernandez, who was referring to the implementation of the higher power rates, said.

GE Philippines CEO Jose Emmanuel de Dios said cheaper oil prices could also temper power-rate increases. However, Aboitiz was quick to point out that it won’t help much because “about one-fourth of last year’s spike came from the shift to liquid fuel alone.”

“The moment these gas plants use liquid fuel, there’s automatically around P1-per-kWh increase. That’s excluding increases in WESM [Wholesale Electricity Spot Market] and other charges,” Aboitiz stressed.

A Meralco bill is composed of the following charges: generation, distribution, transmission, taxes, system loss and lifeline subsidy.

But Pippa is hopeful that the market cap imposed by the Energy Regulatory Commission (ERC) will help temper a rate hike.

“But it won’t be as bad [as 2013] because we’ve got a lower primary cap at the WESM and a secondary cap,”
Aboitiz said.

The ERC has put in place a secondary price cap of P6.245 per kWh once the P9-per-kWh threshold
was breached.

Aside from the secondary price cap, the ERC had also put in place a primary bid cap of P32 per kWh.

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