Co-ops: Supply issues caused higher power prices
By Angelica Y. Yang – July 18, 2021 | 7:59 pm
from Business World
THE PHILIPPINE Rural Electric Cooperatives Association, Inc. (Philreca) said that electricity rates rose in June due to supply issues and not the failure of electric cooperatives (ECs) to procure power through competitive bidding.
“The sudden spike in electricity prices last month is not because there is a failure for ECs to conduct CSPs (competitive selection processes). This is more of a supply concern… We only conduct CSPs and enter to power supply agreements depending on our long-term projected needs — and not more than that,” Philreca told BusinessWorld in an e-mail last week.
“We cannot just purchase or enter into contracts that will result to more than what we need so as to avoid purchasing from the market because this would result in higher prices for electricity,” it added.
Advocacy group Laban Konsyumer, Inc. (LKI) called on ECs to enter into power supply agreements with generation companies (gencos) through CSPs following the recent surge in wholesale electricity spot market (WESM) prices.
In a July 11 statement, LKI President Victorio Mario A. Dimagiba said that high spot market prices “greatly affected” ECs that bought more from the WESM, which in turn burdened consumers in the form of higher electricity rates.
“Batelec II, the largest EC in the Philippines, implemented an increase of P1.87 per kilowatt-hour (kWh). Penelco, the EC of Bataan, implemented an increase of P1.54/kWh. In PELCO II (located in) Pampanga, the rate hike was P2.50/kWh. What’s surprising is the extent of the WESM exposure of all these electric cooperatives,” he said.
“Considering the examples of ECs in Bataan, Batangas, and Pampanga that bought more than 30% of their power from the WESM, this meant that uncontracted capacities are available. ECs should conduct tender offer(s) and invite gencos to enter into power supply agreements via the CSP,” Mr. Dimagiba added.
The Independent Electricity Market Operator of the Philippines estimated the average spot market price at P6.53 per kilowatt hour in June, down from P7.66 in May.
Philreca, whose members number 121 ECs, said entering into contracts through CSPs is a long-term commitment of up to 20 years.
“What happened in the last months is not really because we lacked the initiative to conduct CSPs — this is really because there was a lack of supply, and we were forced to buy from the market temporarily,” the organization said.
Philreca said procuring power via CSPs can result in stable electricity prices as long as the contracted generation companies provide the committed amounts, and that they do not undergo unplanned outages or maintenance work.
Between May 31 and June 2, the Luzon grid was placed under a series of yellow and red alerts following forced plant outages, thinning reserves, and as demand rose due to high temperatures.
The system operator declares a yellow alert if reserves fall below ideal levels. The yellow alert shifts to a red alert if the supply-demand balance worsens, triggering rotating brownouts.
