Be mindful of costs, DOE official tells Meralco

The Department of Energy (DOE) is looking into the energy sourcing strategy of Manila Electric Co. (Meralco) as it expects price spikes at the Wholesale Electricity Spot Market (WESM).

Energy Secretary Carlos Jericho Petilla reminded Meralco in a letter that it was supposed to ensure “least cost” supply to clients and asked the country’s distribution utility how it would do so amid the anticipated rise in prices of WESM this summer.

Petilla said the DOE noticed Meralco’s recent television advertisements, which indicated the utility’s increased exposure to WESM.

“In this regard, we wish to inquire on Meralco’s plans to secure its energy requirements in the coming months given the expected price volatility in WESM during these periods,” Petilla said.

Power prices have been on a rollercoaster trend since end-2013, when the tight supply situation, coinciding with high power demand during the holidays, resulted in record power rates.

At the time, Meralco announced through the media that much of the price cost was driven by surges in WESM prices and that Meralco would not earn from pass-through costs, such as power generation charges.

In December 2013 and January 2014, regulators intervened in the normally automatic pass-on charges by ordering WESM operator Philippine Electricity Market Corp. (PEMC) to recalculate spot rates affecting the said billing months.

Yet even with the review of the increases seen in the spot market component, Party-list Bayan Muna on April 10 submitted a fresh petition to the Energy Regulatory Commission, asking it to reject any application for higher power rates from the utility.

The generation charge for the billing month of January was capped at P5.67 per kWh (same as in November and December 2013) in response to the public uproar over high power rates. The January rate was originally thought to hit P10.23 per kWh, but was recomputed to P6.12 per kWh after regulators ordered a revision of unusually high spot market rates. The ERC has yet to decide on the recomputed rates.

On March 19, Meralco CFO Betty C. Siy-Yap told reporters that the company might reduce the generation charge hike in customers’ December bills to P0.27 from the original P3.44 a kWh. The overall deferred increase, including taxes based on the generation charge, was supposed to be P4.15 per kWh. The hike in customers’ bills was not implemented after the Supreme Court issued a restraining order.

On March 18, PEMC released new Luzon-wide prices. This applied to all power distribution companies, including Meralco.

The generation charge hike was said to have resulted from a temporary tightness in power supply, when a number of power plants had unplanned outages around the time that three natural gas plants were affected by the Malampaya natural gas platform’s maintenance shutdown in November.

The supply tightness drove up prices at the WESM, where Meralco and other generation firms purchased power to meet any shortfall in their electricity requirements.