Meralco explains power buying
By Abigail L. Ho
Philippine Daily Inquirer
First Posted 03:54:00 05/09/2008
MANILA, Philippines -- Factors outside of price affect the Lopez-led Manila Electric Co.’s buying decisions from the wholesale electricity spot market (WESM), making its buying strategy more complicated than it looks, according to the distribution utility’s president.
At a power-sector stakeholder meeting at the energy department Thursday, Meralco president and chief operating officer Jesus Francisco said the company has to declare its supply requirements 24 hours before each trading day.
This means that factors such as weather changes -- which could affect demand on a specific time of day -- are almost impossible to factor into the company’s buying strategy for a particular day, he said.
“When it rains, sometimes demand drops 100 megawatts below our forecasts. When you project your requirements, you can end up buying much more than what you actually want,” Francisco explained.
Take the case of the April billing month, for example. Meralco’s average purchase price at the WESM stood at a high P7.48 per kilowatt-hour while the effective settlement price at the market then was just P5.72 per kWh.
This meant that the average price of Meralco was higher than the market.
Lasse Holopainen, president of WESM operator Philippine Electricity Market Corp., earlier noted that over the past two months, there were times when Meralco was buying at the market average price and instances when it was buying at above-average prices.
You can’t choose
“But sometimes you can’t choose when to buy. Unless we’re privy to their contracts, it’s very hard to say,” said Holopainen.
“So how much flexibility they have and whether or not they have to change their trading patterns, I don’t know since we’re not privy to their contracts,” he said.
Francisco said prices at the WESM were not always high. During the early days of the electricity spot market, for instance, prices were much lower even than those offered by state generator National Power Corp. and Meralco’s independent power producers.
From February to April this year, however, prices at the electricity bourse were relatively high, he said.
“Right now, what we need is a clarification of what the (Electric Power Industry Reform Act of 2001) really wants us to do,” Francisco said.
The EPIRA states that no distribution utility can source more than 90 percent of its requirements from bilateral supply contracts. Under the law’s implementing rules and regulations, distribution utilities are required to source at least 10 percent of its requirements from the WESM.
An official of the Energy Regulatory Commission admitted that there was some confusion in the interpretation of the law, and that a clarification should be made.
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