Petilla: Meralco Dec rate must be cut

MANILA, Philippines – There was no true competition in the electricity spot market during the shutdown of the Malampaya gas facility last year, leading to the spike in prices, Energy Secretary Carlos Petilla declared, citing results of an initial probe done by his agency.

Petilla said the Energy Regulatory Commission (ERC) will compute how much generation charge should be passed on to consumers and will come out with it later this week.

The Energy chief said they discovered that at least 36 power generation companies violated Wholesale Electricity Spot Market (WESM) rules by not offering their full capacities during the 30-day maintenance of Malampaya, resulting in high clearing prices.

“If there is no fair competition, then whatever was the result of the trading was wrong,” he noted.

He said he suggested that administered pricing be done, but “ERC said it should be regulated pricing based on cost, but what is that cost. They will have to decide on it.”

Meralco’s rate in December spiked on account of higher generation charge for power purchased from WESM. Meralco had to buy more power from the spot market due to tight supply brought about by the Malampaya maintenance and the simultaneous outages of some power plants.

The average WESM price ballooned to P33.216 per kilowatt hour (kWh) in November and P36.08 per kWh in December, against only P13.74 per kWh in October.

Petilla said the expensive power plants were cleared because several plants under-offered.

While some of these plants may have valid reasons, he said this was still a violation of WESM’s must-offer rule. When trading in the WESM, generating companies are required to offer their full available capacities to ensure transparency and curb anti-competitive market behavior.

“I found out that there was an hour in which some 2,300 MW of capacity went missing. This even went up to 4,000 MW. When that happened, there was no real competition in the spot market because many did not offer,” Petilla said.

Results of Department of Energy’s (DOE) probe was detailed in its report on “Observations regarding Substantial Increase in Power Generation Cost During the 2013 Malampaya Turnaround” submitted to the Supreme Court.

In the report, DOE said up to 2,703 megawatts of capacity were not offered in the spot market on November 13, and up to 3,148 MW on December 5 – two of the days when high market clearing prices were observed.

The Meralco rate hikes are subject of investigations in Congress and a case before the SC. The SC, through a restraining order, barred Meralco and the power generation companies from collecting generation charges from consumers. (READ: SC extends TRO on Meralco rate hike) – Rappler.com