ERC analysis finds ‘notable’ disparity in movement of power, coal prices

By Alena Mae S. Flores – December 29, 2023, 9:30 pm
from manilastandard.net

The Energy Regulatory Commission (ERC) said an initial analysis of its fuel audit showed a “notable disparity” between the substantial reduction in coal prices globally compared to the actual decline in local generation rates over a 24-month period.

“We’re pleased to note that generation rates are stabilizing, although we noticed that while the global coal prices have really reduced significantly, the generation rate trend did not move the same way. It went down, but not in parallel, not in the same manner as the global coal prices have gone down,” ERC chairperson Monalisa Dimalanta said in news briefing late Thursday.

The generation charge represents the cost associated with producing the power supplied to consumers, excluding other charges such as transmission fees, system loss, distribution fees, subsidies and taxes.  It is collected by distribution utilities and remitted to the generation companies responsible for providing the electricity and constitutes 60 percent to 65 percent of the monthly electricity bill of Filipino consumers.

Dimalanta said the ERC is set to release early next year its findings on the initial fuel cost audit conducted on generation firms.

The audit involves an analysis of the approved fuel formula of generation companies (gencos) vis-à-vis the amount collected from distribution utilities (Dus) that are being passed on to consumers.

Dimalanta said the ERC was not saying that the gencos were taking advantage of the situation, but the regulator only wanted to understand the reason.

“It could be because our macro-economic conditions are still not as good. The peso-dollar exchange rate is still affecting importation, the cost of logistics in terms of importation could also affect [generation charges],” she said.

Dimalanta said although generation rates started to stabilize after reeling from the effects of the Russia-Ukraine war that erupted in February 2022, the sharp descent in coal prices did not appear to reflect an equivalent impact on the trend of generation costs in the country.

“The increase in coal prices went up by as much as 150 percent, but the decline so far is around 50 percent,” Dimalanta said.

She said prices of coal were being monitored closely given the domination of coal-fired power plants in the energy landscape, with more than 80 percent of coal supply being imported.

“If you notice, most of our coal generation plants use New Castle as their index, although we did note also that they’re buying off Indonesia which also has its own index which is lower than New Castle. That’s one thing that we are studying as well,” she said.

Dimalanta said the good news is that the ERC saw less volatility in generation rates in 2023 as the agency continued to monitor the generation charges collected from consumers by DUs.

“It seems for the last 12 months, the generation rates stabilized may be because we’re coming off from very high prices of 2022,” she said.