Meralco reviews consumption, rates as fuel prices fall

by Myrna Velasco, December 21, 2014
from Manila Bulletin

The collapse in fuel prices which may trigger reduction in electricity rates is being re-assessed by Manila Electric Company (Meralco) as such may stimulate demand growth that could put power supply-demand forecasts in quandary.

Meralco president Oscar S. Reyes said they are looking at how the lingering nosedive in oil prices will affect the overall electricity rates – primarily during the hot summer months when consumption typically hits its peak.

Next year’s summer months will be particularly “tricky” because it has already been projected that it will be a period of extremely ‘tight supply’. This year’s peak demand within the Meralco franchise area was at 6,121 megawatts; and while the utility firm expects its sales growth in 2015 to hover at 3.5-percent that may also potentially climb higher depending on consumers’ usage.

“To us, it is going to be a tight summer. We are hopeful that the measures that have been taken in terms of ILP (interruptible load program) and the initiatives to keep Ilijan running will be helpful in meeting anticipated demand growth,” Reyes said.

He enthused though that the lower oil prices “could mean lower electricity rates… and that could translate to higher consumption… really, it tends to encourage consumption, so we have to look at that.”

Any further expansion in demand would also need ‘extra measure’ in shoring up supply – either through de-loading of capacity of the ILP participants or the immediate interconnection of new power facilities – so the extremely feared power supply interruptions could be avoided.

Reyes has noted that for every additional 1.0-percent growth in demand for the Meralco franchise area will warrant capacity addition of 42 megawatts on its required supply portfolio.

He explained further that the movement in supply-demand prognosis “is a matter of scenarios.”  Yet aside from lower fuel costs, he added that equally important to scrutinize would be the probabilities of forced outages in power plants.

The Meralco executive stressed “the key question is: how much would be the forced outages that you would allow for? Another question is: will it be a hot summer?”

Company officials have indicated that their electricity sales in the last quarter of 2014 already gained traction compared to a relatively flat performance in the first half.

Robust sales growth had been logged from September at 4.7-percent; then October at 5.2-percent and an even more invigorating rise of 6.6-percent in November. These developments, according to the utility firm’s executives, will likely catapult Meralco into meeting its full year profit target of P17.8 billion.

“We’re on track to meet our profit guidance… but until we see the audited results, it’s still difficult to conclude,” Reyes said.

For most months this year, he similarly noted that power plant outages had not been as frequent compared to what was seen as snarled power system in 2013.

“Plant outages still happened but there had been no confluence of Malampaya shutdown, forced outages and scheduled outages… I think because of that experience – the must-run and must-offer rules (of the Wholesale Electricity Spot Market) are strictly followed,” Reyes said.

Said rules in the spot market are being enforced to ensure the availability of power plants and for the must-run units to be readily called upon for dispatch when the electricity system is already threatened with potential power supply shortages.