Cost im­pact to Mer­alco cus­tomers ad­justed to

Malam­paya shut­down

Manila Bulletin - - Business News - By MYRNA M. VE­LASCO

If a lower se­condary cap in the Whole­sale Elec­tric­ity Spot Mar­ket (WESM) would not ex­actly be the vi­able op­tion, the En­ergy Reg­u­la­tory Com­mis­sion (ERC) is propos­ing pre-emp­tive mea­sure that could shield con­sumers from price spikes dur­ing “ex­tra-or­di­nary events” in the power in­dus­try, such as the Malam­paya shut­down.

ERC Chair­man Jose Vi­cente B. Salazar in­di­cated that they may “for­mu­late a pre-emp­tive mit­i­ga­tion mea­sure that would ap­ply only to th­ese ex­tra­or­di­nary con­di­tions to limit price volatil­ity and ex­ces­sive lev­els of prices in the WESM.”

As this de­vel­oped, the De­part­ment of En­ergy (DOE) in­di­cated that the cost im­pact of the Malam­paya shut­down to cus­tomers of Manila Elec­tric Com­pany (Mer­alco) had been re-ad­justed to R1.44 per kilo­watt hour (kwh) in­clu­sive of value added tax (VAT) charges.

Mean­while, the reg­u­la­tory body, in par­tic­u­lar, has been un­der­tak­ing “net rev­enue anal­y­sis” (NRA) of the costs be­ing in­curred by par­tic­i­pant-power gen­er­a­tors in their trad­ing of ca­pac­ity in the spot mar­ket, to serve as a ba­sis in de­ter­min­ing any ad­just­ments in the WESM caps.

The in­tent of the NRA is “to en­sure that all types of gen­er­a­tors should have positive re­main­ing rev­enue af­ter de­duct­ing their costs.”

The power gen­er­a­tion com­pa­nies, in par­tic­u­lar the oil-fired plants, have been com­plain­ing that the caps are not fea­si­ble for them to even re­cover their fuel costs when their plants are called for dis­patch.

Pri­mor­dially, the De­part­ment of En­ergy (DOE) has re­quested the in­dus­try reg­u­la­tor to re­view and prob­a­bly lower the se­condary cap in the WESM.

The se­condary cap is one of the pre­vail­ing cost-cush­ion­ing mea­sures so in­or­di­nate elec­tric­ity rate spikes can be tem­pered when prices go volatile in the spot mar­ket.

Salazar noted that the reg­u­la­tory body “al­ready started the process of re­view­ing the se­condary cap for the WESM,” but they are not just lim­it­ing ef­forts on this so they can also weigh the con­cerns of power gen­er­a­tors for vi­able re­turns on run­ning the facilities.

The ERC chief still qual­i­fied though that as the DOE’s plea is an­chored on the sched­uled shut­down of the Malam­paya gas pro­duc­tion fa­cil­ity, “the ERC may fa­cil­i­tate the re­view and ad­just the ex­ist­ing cap, or for­mu­late a pre-emp­tive mit­i­ga­tion.”

Even the op­er­a­tor of the WESM ac­knowl­edged that ad­just­ments in the costs are war­ranted, pri­mar­ily fac­tor­ing in the gen­er­a­tors’ fuel costs as well as the changes in other cost vari­ables, such as for­eign ex­change ad­just­ments.

The sched­uled down­time of the Malam­paya fa­cil­ity is for 20 days from Jan­uary 28 to Fe­bru­ary 16. His­tor­i­cally, events of such type trig­gered sup­ply tight­en­ing that sub­se­quently ig­nited cost spikes pri­mar­ily man­i­fest­ing in set­tle­ment prices at the WESM.

The spot mar­ket’s pre­vail­ing pri­mary cap is at R32 per kilo­watt hour (kwh); while the se­condary cap was set at R6.245 per kwh – to be reck­oned on price out­come breach of the set price thresh­old of R9.00 per kwh over 168 hours trad­ing in­ter­val.

The price caps had been ex­tended un­til the time that the re­view­ing tri­par­tite body could come up with a more ac­cept­able and in­dus­try-fea­si­ble price lev­els of mit­i­gat­ing mea­sures that could keep both the in­dus­try play­ers and the cost-volatile spot mar­ket stay afloat.

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