Expect higher electricity rates as demand peaks

by Lenie Lectura – April 19, 2016

from Business Mirror

DESPITE the record-high power demand being experienced these days due mainly to the rising heat index, rotating brownouts may still be avoided in the areas being served by the Manila Electric Co. (Meralco) with the Interruptible Load Program (ILP) in play. But not higher electricity rates.

The escalated demand for electricity, amid the prevailing thin power reserves in the Luzon grid, as what was experienced last Friday, will likely result in higher power rates next month, at least for Meralco customers.

The increasing heat index triggered an unusual rise in demand for power, where Luzon’s requirements alone reached around 9,700 megawatts (MW), breaching historical records, according to the Department of Energy (DOE).

This prompted the National Grid Corp. of the Philippines (NGCP) to issue a red alert in Luzon from 1 to 3 p.m. The red alert was lifted at 3:01 p.m., then NGCP placed Luzon on yellow alert once more that day.

Meralco Head for Utility Economics Lawrence Fernandez said in an interview the yellow and red alerts indicate a tight supply situation in which there is less or no reserve margin in the grid.

This, he said, will typically be reflected as higher spot-market prices, especially during the periods of yellow and red alerts. “These may have an upward pressure on generation costs this April, which will be reflected in the May generation charge,” Fernandez added.

The Meralco official did not provide numbers, saying it was too early to compute how much this will impact on generation charge, the largest component of an electricity bill.

Normally, the utility firm provides an indication of a possible upward or downward power-rate adjustment during the first few days of the month before actual rates are issued every 8th or 9th day of the month.

“We’re still in the middle of the supply month and we will have to see how the supply-demand situation unfolds in the next two weeks,” Fernandez said.

Meralco’s April bills already reflected a higher generation charge, mainly on account of higher demand. Moreover, a P0.08 per kilowatt-hour (kWh) increase in the feed-in tariff allowance-rates also contributed to the overall rate increase of P0.22 per kWh compared to last month’s rate. For a typical household consuming 200 kWh, April’s adjustment translates to an increase of around P44 in electricity bill.

The increase in last month’s rates was primarily due to the generation charge, which increased by P0.10 per kWh from last month.  Meralco said generation charge shoot up as a result of higher charges from the Wholesale Electricity Spot Market (WESM), which went up by P2.23 per kWh.  Peak demand in the Luzon grid increased by more than 500 MW from the February-to-March supply months with the approach of summer.

Plant shutdown

Last Friday’s critical power-supply situation in Luzon could also be blamed on some power plants that suddenly conked out. Kalayaan units 3 and 4 (180 MW each); QPPL (289 MW); Malaya 1 (130 MW); Botocan 2 (10 MW); Pagbilao 1 (382 MW); and Magat units 3 and 4 (95 MW each) were all put on emergency shutdowns.

Meanwhile, the capacity output of Calaca 1 (200 MW) and 2 (300 MW) had been limited to 190 MW and 220 MW, respectively. The DOE has already directed power producers to reschedule the maintenance work of their power plants after elections.

They agreed.

However, the agency said the sudden shutdown—mostly due to technical glitches experienced by some power plants—was already beyond its control.

“Higher power rates would be a consequence of meeting the necessary power supply. It just so happened that there were unscheduled power- plant shutdowns that coincided with scheduled plant shutdowns,” Energy Secretary Zenaida Y. Monsada said.

The DOE official also recognized the possibility of higher power rates next month, because some of the coal-fired power plants that were shut down had to be fed with diesel, which is more expensive than coal.

“Malaya coal plant, for instance, when it was called to operate, had to utilize special fuel oil, which is in
between bunker and diesel, thus, more expensive than coal,” the DOE chief explained.

The DOE said it is closely monitoring maintenance-shutdown schedules of plants to make sure all plants will come online before the end of April. Based on the latest monitoring, most plants are already back online, but not all are running at full capacity.

There are no scheduled plant shutdowns in May. One unit of Pagbilao coal power plant was supposed to be on scheduled maintenance until May 1, but it came back early and resumed operations last Friday.

Revised outlook

Meralco, the country’s largest distribution utility in the country serving over 5 million customers to date,  awaits an updated forecast of power demand and supply from the DOE.

Fernandez said this would help the company plan ahead during critical times, particularly summer, when demand for electricity is at its peak.

“We will await DOE’s guidance on the expected Luzon supply-demand situation. We were advised that the DOE will be updating its forecast, considering that the peak demand registered last week already exceeded the initial forecast of 2016 peak demand of around 9,400 MW,” Fernandez said in the same interview.

Latest available data have it that Luzon will have a total supply of about 9,000 MW, with a demand of 8,900 MW, while the Visayas will have a total supply of 1,800 MW, with a demand of 1,600 MW.  For Mindanao, it will have a supply of 1,700 MW with a demand of 1,500 MW. These figures were provided by Monsada in September last year. There are no available updated figures provided by the DOE up to now.

The DOE also confirmed on Monday night that a revised forecast for Luzon is in the works.

“We are updating still, but we are looking at an upward revision,” Energy Assistant Secretary Patrick Aquino said  in a text message when sought for comment.

He did not elaborate on what he meant by an “upward revision.” He only said: “Figures are dynamic. We will come out with updated figures soon.”

He did provide, however, a weekly forecast on the country’s power situation. For April 16 to 22, power demand is expected at 9,439 MW in Luzon, 1,749 MW in the Visayas and 1,455 MW in Mindanao.

Supply, meanwhile, is expected to reach 10,941 MW in Luzon, 2,143 MW in the Visayas and 1,404 MW in Mindanao. Except for Mindanao, which is still on red alert, the DOE said Luzon and the Visayas’s power situation this week is “normal.”

Contingency measures

Manual Load Dropping, or rotating power outage, was averted last Friday in Luzon because Meralco activated the ILP.

The ILP scheme works by calling on business customers with loads of at least 1 MW to run their own generator sets, if needed, instead of drawing power from the grid.

With the ILP, power supply from the grid that will not be consumed by participating customers will be available for use by other customers within the franchise area. Through this, the aggregate demand for power from the system will be reduced to a more manageable level, helping ensure the availability of supply.

With the ILP, the peak demand was kept at a lower level of 9,416 MW.

“With the implementation of ILP after a red alert, as advised by the system-grid operator, the estimated deloaded contribution of 247 MW from around 121 ILP participants helped avert rotating brownouts.

“We were able to prevent power interruptions, which would have affected close to 300,000 customers last Friday,” Meralco Spokesman Joe Zaldarriaga said.

Moreover, the government-owned Malaya power plant is already on stream as a must-run unit during weekdays, where power demand is higher compared to weekends. Currently, the plant’s Unit 1 provides 290 MW of capacity, while the Unit 2 is still starting up and is expected to be online on Wednesday night, further augmenting the power supply in Luzon.