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Power rates up across Philippines

ERC allows increase in generation costs

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12:09 AM March 29th, 2012

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March 29th, 2012 12:09 AM

POWER SOURCE The Maria Cristina Falls supplies water to the 59-year-old Agus 6 hydroelectric power plant in Iligan City, the main source of electricity for Lanao del Norte and the rest of Western Mindanao. The region suffers from daily outages of up to 15 hours because of a power shortage. The government will rehabilitate the plant over 30 months at a cost of P2.6 billion. RICHEL V. UMEL/INQUIRER MINDANAO

Power consumers should brace themselves for higher electricity rates starting May as the Energy Regulatory Commission allowed state-run National Power Corp. (Napocor) to jack up its generation charges in Luzon, the Visayas and even in brownout-plagued Mindanao.

The ERC approved the increases in generation charges by 69.04 centavos per kilowatt hour (kWh) in Luzon, 60.60 centavos per kWh in the Visayas, and 4.42 centavos per kWh in Mindanao.

Currently, Napocor’s effective rate is P5.0160 per kWh in Luzon, P4.0740 per kWh in the Visayas and P2.9321 per kWh in Mindanao.

The ERC said in a statement that the rate increases covered the applications filed by Napocor and  Power Sector Assets and Liabilities Management Corp. (PSALM) under the generation rate-adjustment mechanism (GRAM).

The GRAM allows utilities to recover costs associated with fuel and purchased power, and incremental currency exchange-rate adjustment (Icera) mechanism, which enables utilities to recover foreign exchange-related costs.

Entitled to recover costs

In an interview, ERC Executive Director Francis Saturnino Juan said the approvals to recover fuel and foreign exchange costs incurred from January 2007 up to April 2010, covered the 10th to 17th cycles of the GRAM and the 15th to 16th cycles of Icera.

“These fuel, purchased power and foreign currency costs are legitimate costs already incurred by Napocor and PSALM in their supply of power to their various customers. By law, they are entitled to recover these costs as part of the price of electricity they sell to their customers,” Juan said.

He said the ERC had already mitigated the impact of these adjustments by spreading their recovery over a longer period and by coming out with the rate increases “at the soonest to avoid additional carrying charges to be included in the recoverable amounts.”

Juan, however, pointed out that the full impact of the increases on Napocor’s effective rates would not be shouldered by grid consumers since distribution utilities and electric cooperatives no longer purchase their full power needs from Napocor, following the sale of certain state-owned power facilities.

Outages in Mindanao

However, the power rate increase comes at an inopportune time as Mindanao is experiencing outages of at least two hours a day.

The power situation on the island is likely to worsen by April 9 when the Pulangi 4 facility will  shut down for repairs and maintenance. The shutdown will shed off 120 MW of crucial capacity in Mindanao.

Add to that, the use of more diesel-fired facilities will likely raise power prices in Mindanao by another 50 to 80 centavos per kWh amid the rotating brownouts, Energy Secretary Jose Rene Almendras said on Tuesday.

Luzon and the Visayas will be spared from brownouts this year, given healthy reserves of roughly 2,000 MW and 500 MW, respectively.

Sen. Sergio Osmeña III, chair of the Senate energy committee, said the electric bills of Mindanao residents would go up by around 50 centavos per kWh should the plan to use power barges to augment the island’s power supply push through.

“If the people are going to bite the bullet, it’s not going to be a very big bullet,” he said at a news conference.

Temporary solution

Osmeña noted, however, that using power barges should only be a temporary solution, given that a power barge is an expensive source of electricity unlike a hydroelectric or geothermal plant.

To illustrate how expensive a power barge was, Osmeña said each one would cost millions of pesos just to transfer from Manila to Mindanao.

“Once there, you have to take care of the transmission connection, make sure it is securely anchored at the pier. All this takes eight months. It’s not like a motorboat you can just send somewhere. These are complicated pieces of equipment that cost millions of dollars. And the one who owns the barge would demand a contract for its use,” he said.

Really expensive

Even if the barge is used only 10 percent of time, it would bring up the rate of electricity by 50 centavos, he said.

“It’s really expensive. That’s why no one uses it except for emergencies and at only one to two hours a day during super peak hours,” said Osmeña, co-chairman of the Joint Congressional Power Commission.

The commission is tasked with oversight responsibilities on the implementation of the Electric Power Industry Reform Act (Epira) of 2001.

Unless the government addresses the Mindanao power situation, it is possible that the island would lose power for a greater part of each year—something that would further discourage business investments in the area, the senator said.

“The ideal is that loss-of-load estimate should be zero. You must estimate how many days in the coming years you will lose power. Mindanao now has 200 a year (that it loses power). Next year could be 240 days. Mind your factories. Maybe you have power this year but how about next year? Your equipment could go kaput,” he said.

Root cause

The senator recalled that after the Epira law was approved in 2001, “the residents of Mindanao, through their representatives, pushed for a 10-year exemption from the privatization program of the Napocor-owned plants in Mindanao, notably the Agus-Pulangi hydropower complex which at that time supplied about 75 percent of the power needs of Mindanao at the lowest rate.”

“Even worse, the bicameral committee tasked with oversight responsibilities on the Epira law’s implementation agreed to postpone the construction of the transmission line interconnection between Leyte and Surigao,” he added.

“But the energy demand studies made by the Department of Energy showed that Mindanao would run short of power in about 10 years. So with much misgiving, I supported, as a member of the bicameral committee on the Epira, the wishes of my brother-congressmen from Mindanao,” Osmeña said.

He said he regretted that decision since 2010 because of the brownouts in Mindanao.

Isolated from grid

Osmeña pointed out that while the rest of the country transitioned to the new market-oriented regime, Mindanao remained isolated from the national transmission grid that prevented excess power in the Visayas from being fed into Mindanao.

“The Luzon and Visayas areas now enjoy a sufficient supply of electricity. Visayas alone has a surplus of 380 megawatts, which could easily cover the current shortage in Mindanao,” he added.

Osmeña proposed a workshop sponsored by the Department of Energy for all stakeholders to agree on short-term and long-term solutions to the power needs of Mindanao.

Bayan Muna Representative Teodoro Casiño called on President Benigno Aquino III to have the government temporarily take over the operation of the two power barges now run by Aboitiz-owned Therma Marine Inc., which acquired these from Napocor in 2010.

Casiño said the move was aimed at preventing the escalation of power rates to be passed on to consumers.

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