The Philippine power industry both producers and distributors will have to accept new pricing that will balance the cost of production and supply stability at the least cost to consumers.
Philippine Independent Power Producers Association (PIPPA) president Luis Miguel Aboitiz told Business Insight the country could expect changes to be made this year in certain rules and policies to reduce or prevent price volatility to the consumers.
“Policies will have to be made about the right balance between cost and stability. Customers, particularly the lower income ones, are not willing to accept the volatility we experienced recently,” Aboitiz said.
“However, any policies that will be crafted should help ensure that investors are not discouraged from putting up needed generation assets moving forward, rules are respected and consistently applied, and transparency and integrity of the market is promoted,” he added.
The industry was roiled late last year by Manila Electric Co.’s decision to increase charges due to what it reported was the higher cost of electricity it bought for distribution. The higher production cost was attributed to the maintenance shutdown of the Malampaya natural gas plant.
This forced several generating plants to buy costlier fuel.
The Supreme Court ordered a 60-day temporary restraining order on the Meralco plan.
The problem of pricing was on top of the still unresolved power crisis in Mindanao.
Meralco, the country’s largest power distributor, saw its generation charge or the cost of power it bought from its suppliers rise to P9.11 per kilowatt-hour (kWh) in December, prompting various consumer groups and party-list legislators to file complaints which then led to a 60-day temporary restraining order by the Supreme Court.
Meralco then saw its generation charge for the January billing period reached another new record high of P10.23 per kWh caused primarily again by the Malampaya shutdown which crossed two billing periods and was coupled with the planned and unplanned outages of generation plants.
But while the Meralco’s rate issue seems to have taken away the limelight from the Mindanao power crisis for the meantime, the energy sector said it remains all eyes on the upcoming situation in the power-starved island.
Department of Energy Secretary Carlos Jericho said Mindanao will not be spared from power outages this year as capacity will still not be able to meet demand.
Petilla, however, stressed that the potential power woes can be averted this time around once electric cooperatives there decides to source their supply from the Interim Mindanao Electricity Market (IMEM).
Various areas in Mindanao suffered seven to nine hours of rotating brownout daily last year during the peak of the summer months as no immediate solution was made available by the government.
But this will not be the case this year with IMEM in place, assured Petilla.
Both the energy chief and the PIPPA president agreed that the IMEM was one of the most important projects that were implemented last year in the energy sector.
“The IMEM, some are saying, has no effect yet but actually it is very crucial for summer and the mere fact that we implemented it this early, in fact late last year, is a preparation for summer. It has an impact on Mindanao but the biggest impact will be felt by summer,” Petilla said.
The IMEM is a platform for electricity market in Mindanao that is expected to bring in additional capacity to bridge the island’s power supply gap while waiting for big capacity projects to come in by 2015.
Petilla said the electricity market is expected to draw in about 300 megawatts (MW) of power from uncontracted and available power capacities in Mindanao.
Under the IMEM, energy distributors will be allowed to sell power supply from its embedded generators to areas having deficit with all of the distribution utilities and other generation capacities connected to the Mindanao power system mandated to participate in it.
“Although this (IMEM) was started in December, the first payment is not due until end of January, so we do not know how successful this will be yet,” Aboitiz said.
Aside from the IMEM, another program which both Petilla and Aboitiz consider as having the most impact for last year was the retail competition and open access (RCOA).
“RCOA made significant effects because it stirred the entire contestable customers. Slowly the people are now realizing that they can actually get cheaper power if you go direct and it brought about competition,” Petilla said.
RCOA is scheme that allowed big electricity consumers in Luzon and Visayas to choose their own power suppliers instead of distribution utilities sourcing electricity on their behalf.
The qualified customers under the scheme are referred to as contestable customers or those with at least one megawatt (MW) electricity consumption over the previous year.
RCOA is considered as a major milestone in the Philippine electric power industry as it provided competition in the retail supply segment of the country’s electric power industry by giving freedom to end-users to buy their electricity from power plant owners.
As of December 25, Aboitiz said that RCOA’s implementation has proved to be successful so far as 292 customers or 32 percent of the total 909 contestable customers representing about 850 MW have already switched from their former utility to new open access suppliers.
“From what I know among some of the contestable customers, they told us that they seem to have a good deal with the various retail electricity suppliers that they were able source from,” Petilla said.
“They were able to get a good deal because of the completion, what they are paying now is lower as compared to what they were paying before. So it is significant to the large users and locators in the Philippines, they can contract their own power,” the energy chief added.
Aboitiz said more contestable customer switches should be expected this year given the success of the RCOA so far.