Ilijan standoff to hike power rates

By Alena Mae S. Flores – October 08, 2017 at 08:20 pm

Consumers of Manila Electric Co. will be exposed to price volatilities at the Wholesale Electricity Spot Market, or WESM, if the government terminates the contract of San Miguel Corp. to manage the output of the 1,200-megawatt Ilijan power plant in Batangas province.

San Miguel president and chief operating officer Ramon Ang said PSALM was blatantly disregarding the welfare of consumers by insisting on trading the output of the 1,200-MW Ilijan power plant in the spot market.

“The Ilijan power station is used to continuously supply electricity to the grid including hours when the demand is high. If we sold to the WESM, small consumers would have to pay higher electricity bills. Even businesses, which are the largest consumer of energy, would suffer,” Ang said.

Meralco, in a position paper to the case of San Miguel subsidiary South Premiere Power Corp. against Power Sector Assets and Liabilities Management Corp., said the termination of the Ilijan IPPA “will prevent it from purchasing electricity from SPPC.

Meralco will lose 1,180 MW of electricity supply from Ilijan under the terms of the Energy Regulatory Commission-approved Meralco-SPPC supply agreement, which provides cheaper electricity to Meralco’s end-users.

“Meralco will have to purchase electricity from the WESM to cover for the lost 1,180 MW worth of electricity which will expose Meralco and its end-users to the price volatility of the market,” the electricity retailer said.

Meralco’s PSA with SPPC covers 18.74 percent of peak power requirements in its franchise area covering at least 2.7 million households with 200 kilowatt-hours consumption a month.

“This is a huge volume that has a great impact in bringing cheaper electricity to the public. PSALM’s act in terminating the Ilijan IPPA threatens to remove this benefit from the public. If Meralco is prevented from purchasing power from the Ilijan plant, this will thwart its efforts in bringing down the electricity cost for its end-users causing serious and irreparable damage to Meralco and its consumers,” Meralco said.

Ang bucked PSALM’s argument at the courts that SPPC, which manages the contracts of the  Ilijan plant, should have sold its generated power to the WESM, the country’s trading floor of electricity.

PSALM wanted SPPC to trade the Ilijan capacity at the WESM instead of selling ity to Meralco., especially during the contested period between November and December 2013, which the agency said could have optimized revenues from the high prices.

WESM, a trading floor where power is bought or sold, has seen price spikes over the years.

Ang said the Ilijan was a baseload plant that runs 24 hours a day. Its output, thus, must not be traded in the WESM to protect consumers.

PSALM and San Miguel’s differing stance resulted in two different interpretations of the provisions of the independent power producer administration on how the generation payments should be computed.

PSALM claimed SPPC had unpaid obligations but SPPC said it honored its contractual obligations under the agreement.

SPPC said it already paid PSALM P239 billion as of August this year, representing energy fees and capacity fees. For the same period, PSALM also gained  P30 billion from its administration agreement with SPPC.