Meralco warns of higher power rates this summer

by Lenie Lectura – February 21, 2016

from Business Mirror

THE Manila Electric Co. (Meralco) warned government regulators of higher electricity prices in the summer months, if it is not allowed to implement the power-supply contracts it recently forged with power producers.

The utility firm, in applications filed with the Energy Regulatory Commission (ERC), said a significant capacity deficit in its portfolio, especially in the summer months, is foreseen due to the expected high demand for electricity and the scheduled maintenance shutdown of its contracted generating units, as well as possible occurrences of forced plant outage.

“If the IPSAs [Interim Power Supply Agreements] are not implemented during the period, Meralco will be constrained to source from the WESM [Wholesale Electricity Spot Market], where prices are volatile, especially during the summer months,” Meralco said. It added that the situation can be further aggravated and likely result in higher WESM prices in light of the very tight supply under thin reserve-margin conditions during the period.

WESM is the country’s trading floor of electricity, where distributors are exposed to volatile prices as demand and supply drive power costs.

“There is a paramount necessity for the timely approval of this application, and for the issuance of a provisional authority so that Meralco can immediately implement these IPSAs in order to reduce Meralco’s WESM purchases and protect its customers from forecasted high WESM prices, to help ensure reasonable prices for such customer, especially during the summer months of 2016,” Meralco said.

Meralco recently signed separate IPSAs with Toledo Power Corp. (TPC) and Panay Power Corp. (PPC).

Under the agreement, TPC will supply Meralco up to 28 megawatts (MW) from 10 a.m. to 9 p.m. from Monday to Saturday, while PPC will sell up to 45 MW from 10 a.m. to 9 a.m. Monday to Saturday.

Meralco’s IPSAs with TPC and PPC will become effective upon provisional or final approval of the ERC, and expire on February 25, 2017, unless terminated earlier or extended.

Meralco also signed a similar agreement with 1590 Energy Corp. The IPSA states that Meralco will source 170 MW from the power plant on February 26 to July 26 this year every 10 a.m. to 9 p.m. from Monday to Saturday.

Besides this, Meralco may also opt to source up to 170 MW from July 26, 2016, to February 25, 2017, during the same schedule.

However, these IPSAs Meralco signed with the three power producers are still subject for approval by the ERC.

“There is a paramount necessity for the timely approval of applications, and for the issuance of a provisional authority, therefore, so that Meralco can immediately implement these IPSAs in order to reduce Meralco’s WESM purchases and protect its customers from forecasted high WESM prices, to help ensure reasonable prices for such customers, especially during the summer months of 2016,” Meralco said in its applications.

Meralco said the term of the IPSA with PPC and TPC will result in an overall savings of P0.0074 per kilowatt-hour (kWh) and P0.0003 per kWh, respectively.

Meanwhile, savings from the IPSA between Meralco and 1590 is expected at P0.0541 per kWh.

1590 operates and manages the energy output of the 215-MW bunker-oil fired diesel engine power plant located in Bauang, La Uion.

PPC owns and operates a 72-MW diesel-fired power plant in La Paz, Iloilo City. TPC, owns and operates a 40-MW diesel power plant in Toledo City, Cebu.

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