Consumers could unduly face volatile WESM prices – SMC

By Myrna M. Velasco – October 8, 2017, 10:00 PM

from Manila Bulletin

The legally-contested action of state-run Power Sector Assets and Liabilities Management Corporation (PSALM) terminating the independent power producer administrator (IPPA) agreement for the supply contract of the 1,200-megawatt Ilijan power facility could unduly expose electricity consumers to volatile prices in the Wholesale Electricity Spot Market (WESM).

According to San Miguel Corporation President and COO Ramon S. Ang, the insistence of PSALM to trade the capacity of the Ilijan plant into the spot market “is a blatant disregard for the welfare of power consumers who should be shielded from, not exposed to, its price volatility.”

South Premiere Power Corporation (SPPC), which is a subsidiary of the energy unit of San Miguel, had been the designated IPPA of the Ilijan plant in a privatization exercise undertaken by PSALM in January 2010.

Since the Ilijan plant is treated as “base load plant” in the merit order, Ang said “its output must not be traded in the WESM to protect consumers.”

He further explained that the gas plant “is used to continuously supply electricity to the grid, including hours when demand is high,” which is also the time window when prices could spike in the spot market.

Ang thus pointed out “if we sold to the WESM, small consumers would have to pay higher electricity bills. Even businesses, which are the largest consumer of energy, would suffer.”

Beyond that, PSALM’s move to abruptly discontinue the IPPA deal for Iljan would also affect the power supply procurement of its major off-taker Manila Electric Company (Meralco), with the utility firm facing the risk of losing 1,180MW contracted capacity on its portfolio.

This was stipulated by Meralco on its intervention plea into the SPPC-PSALM case, stressing that the termination of the Ilijan IPPA “will prevent it from purchasing electricity from SPPC.”

The utility firm added it “will lose 1,180MW of electricity supply from Ilijan under the terms of the Energy Regulatory Commission-approved Meralco-SPPC PSA which provides cheaper electricity to Meralco end-users.”

If that fate of the Ilijan IPPA deal won’t be reversed, Meralco noted it would be compelled “to purchase electricity from the WESM to cover for the lost 1,180MW (volume) of electricity which will expose Meralco and its end-users to the price volatility of the market.”

It has been further noted that “this is a huge volume that has a great impact in bringing cheaper electricity to the public,” while emphasizing that “PSALM’s act in terminating the Ilijan IPPA threatens to remove this benefit from the public.”

“If Meralco is prevented from purchasing power from the Ilijan plant, this will thwart its efforts in bringing down the electricity cost for its end-users causing serious and irreparable damage to Meralco and its customers,” the utility firm added.