WESM tosses blame on Meralco IPPs for hike in generation charges

The skirmish in the hikes in charges of Manila Electric Company (Meralco) intensified further when the operator of the Wholesale Electricity Spot Market (WESM) tossed accountability on the distribution firm’s independent power producers (IPPs) as the ones contributing substantially in the hike in its generation charges.

In a press statement, spot market operator Philippine Electricity Market Corporation (PEMC) emphasized that “while there may have been an increase in prices at the WESM, there was also a corresponding increase in generation charges from Meralco’s contracted IPPs.

PEMC noted that while its billed cost to Meralco last month climbed 21 percent to P1.98 per kilowatt hour (kWh) to P11.3607 per kWh from February billing of P9.3824 per kWh , this only accounted for about 17.52 percent of the utility firm’s supply base.

It added that if such adjustment will be combined with the P5.5493 per kWh billed by state-run National Power Corporation for energy supplied, “the bottomline impact is about P0.85 per kWh or 13 percent increase.”

PEMC then rapped that the corresponding generation charge increase attributed to its contracted IPPs is heftier, for an impact of P1.00 per kWh or about 21 percent of the overall cost in its blended generation charge.

Based on Meralco’s data posted at its website, the generation charge of First Gen for its Sta Rita facility as billed in March was at P6.7598 per kWh from the previous month’s P4.9019 per kWh and this accounted for 19.45 percent of the utility firm’s supply pie. For the San Lorenzo plant, the cost of its delivered power in March was at P5.8850 per kWh from P4.3931 per kWh in February billing and has 15.27 percent share.

Quezon Power has billed delivered supply to Meralco at P4.4372 per kWh in March, which is P1.0426 per kWh lower from the previous month’s P5.4799 per kWh. It accounted for 13.59-percent share in the utility firm’s supply for the month.

“The generation rate impact of the increased WESM prices from February to March 2010 is about P1.98 per kWh or 21 percent compared to the previous billing month. This shows that in addition to the impact of the WESM prices, the increase in the prices of their contracted IPPs also contributed to their higher generation cost,” PEMC stressed.

It qualified though that “the increase in the generation cost reflected in the electric bills of Manila consumers is due to the shutdown of the Malampaya platform and pipelines which forced their contracted IPPs to utilize more expensive alternative fuel resulting in higher prices of energy procured from natural gas-fired plants.”

Given the price spikes in the spot market, the WESM operator also reminded Meralco to explore other means of supply procurement so it can shield itself and its customers from price volatilities.

Citing Section 23 of the Electric Power Industry Reform Act (EPIRA), PEMC noted the provision that “a distribution utility shall have the obligation to supply electricity in the least cost manner to its captive market, subject to the collection of retail rate duly approved by the ERC.” –MYRNA M. VELASCO, Manila BUlletin