Thin power reserves from January 26 to July 25

MANILA, Philippines – Utility firm Manila Electric Company (Meralco) will tap additional capacity from interim bilateral supply agreements with the units of Global Business Power Corp. (GBPC) from January to July 2015, as Luzon braces for thin power reserves during the period.

In a 20-page application to the Energy Regulatory Commission (ERC), Meralco said that based on the National Grid Corporation of the Philippines (NGCP) power situation outlook, from January 26 to July 25, 2015, the reserve capacity will be below the required contingency reserves due to scheduled maintenance shutdowns and forces outages of major base-load and gas-fired power plants in Luzon.

Meralco also filed for an approval of its Interim Power Supply Agreements (IPSAs) with Toledo Power Co. (TPC) and Panay Power Corp. (PPC).

Its exposure to the Wholesale Electricity Spot Market (WESM) for this period would be mitigated if it will source additional capacity with TPC and PPC, which have unavailable, uncontracted capacity, Meralco said.

In November 2014, Meralco signed with TPC for up to 28 megawatts (MW), with an option for additional 9MW more, and with PPC for up to 27MW. ERC has yet to approve the IPSAs.

TPC owns and operates a 40MW diesel-fired power plant in Toledo, Cebu while PPC owns a 72MW diesel power facility in Iloilo City.

Consumers will shoulder the full amount of electricity fees that TPC and PPC will charge, Meralco said. Under the IPSA, the contract price approved is set at P10.842 ($0.24*) per kilowatt hour (kWh).

In December 2014, Meralco also said it will source 450MW of power from PanAsia Energy, Inc.’s Limay power plant.

Under the IPSA signed, PanAsia will supply Meralco up to 270MW from January 26 to April 25 and up to 180MW from April 26 to July 25, 2015. The ERC has also yet to approve this.

As such, the utility firm stressed that it is of “paramount necessity” for the ERC to approve its application so that it can immediately implement these IPSAs to ensure continuous and reliable electricity at reasonable prices for Meralco customers during the critical period.

The situation can be aggravated and likely result in higher WESM prices because of the very tight supply under thin reserve margin conditions during the said period, Meralco added.

“If these IPSAs are not implemented during said period when the reserve capacity will be below the required contingency reserves, Meralco will be constrained to source from the WESM, where prices are volatile, especially during the summer months of 2015,” the utility firm said. – Rappler.com