Power plant operators say backup electricity will cost consumers more

MANILA – Power plant operators bucked the government’s plan to secure backup electricity whenever their facility shuts down, saying this would jack up their costs.

Luis Miguel O. Aboitiz, Philippine Independent Power Producers Association president, said the government’s proposal would require regulators to go through each power supply contract that plant operators signed with distribution utilities.

“Those contracts are signed. I don’t think you can change those contracts. You’ll have to talk to each individual party as to whether they are willing to change those contracts voluntarily,” Aboitiz said.

Energy Secretary Carlos Jericho L. Petilla earlier proposed that plant operators shoulder the burden of sourcing electricity supply should their facilities bog down.

The measure aims to prevent a repeat of the record high spike in Meralco’s generation charge last month. The Supreme Court has since ordered Meralco to temporarily put off the increase.

The country’s largest power distributor had to buy electricity at the Wholesale Electricity Spot Market (WESM) after a number of its suppliers went on maintenance shutdown at a time when the Malampaya natural gas platform also went on scheduled repairs.

Aboitiz said the inclusion of backup power supply in plant operators’ contracts would also increase electricity rates since they would have to pass on such cost to consumers.

“You put backup power, the question is at what cost? If you go by historical cost, it’s going to be very expensive,” he said.

Besides the potential impact on rates, there is also the question of where plant operators will buy backup power supply, Aboitiz said.

The only option for plant operators is to purchase from the WESM, where prices fluctuate depending on demand and supply conditions.

“You cannot expect to have the same price with backup power. It’s like insurance. Nobody gives you insurance for free,” Aboitiz said.

A third option would have been through a forward or future electricity market, which doesn’t exist in the Philippines.

“Right now we are not allowed to have forward markets because utilities are not allowed to buy derivatives, they are not allowed to pass on the cost of derivatives,” Aboitiz said.

A derivative is a financial instrument whose value is based on the underlying asset. –Euan Paulo C. Añonuevo, InterAksyon.com