October power rates expected to rise as demand picked up

By Alena Mae S. Flores – October 04, 2020 at 07:50 pm
from manilastandard.net

Power rates of Manila Electric Co. will likely go up this month amid increased demand, plant outages and the Malampaya gas supply restriction, a company executive said over the weekend.

“For October rates, there is pressure for generation costs to go up. Demand in September increased versus August. In fact, September 2020 peak demand was higher than September 2019’s,” Meralco head of utility economics Lawrence Fernandez said.

He said it was the first time that power demand increased on a year-on-year basis since the start of the pandemic.
“The higher demand was coupled with more generation plant outages and a Malampaya gas supply restriction,” Fernandez said.

The Meralco official said prices at the Wholesale Electricity Spot Market, the country’s trading floor of electricity, reached P32 per kilowatt-hour on Sept, 5 and 7, while prices for the rest of September remained higher than in August.

The Independent Electricity Market Operator of the Philippines, the operator of WESM, earlier said average power rates were expected to rise as more power plants went on planned and unplanned outages in the first two weeks of September.

“There were multiple price spikes due to thin supply margin due to planned and forced outages of major plants and at the same time, demand has been going up, it reached 12,586 MW on Sept. 8, 2020, which is so far the highest since July 2020,” John Paul Grayda, IEMOP manager for trading operations department, said.

“Given that there were a lot of price spikes for the month of September, we expect that the rates for September is somehow higher as compared to previous months,” Grayda said.

Meralco’s overall power rate went down by P0.0623 per kilowatt-hour to P8.4288 per kWh in September from P8.4911 per kWh in August.

Meralco’s generation charge went down by P0.0381 per kWh to P4.0860 in September from P4.1241 in August as the power retailer continued to impose its force majeure claims.

Force majeure represents reduction in fixed costs from baseload supply contracts and avoided charges from the temporary suspension of mid-merit contracts recently approved by the Energy Regulatory Commission.

The company said that because of the reduced power demand in its service area during the community quarantine period, it continued to invoke the force majeure provision in some of its power supply agreements.

Meralco’s force majeure claim totaled about P463 million in September, equivalent to customer savings of P0.1710 per kWh in the generation charge.

Meralco said that without the force majeure claims, the generation charge and the total rate would have increased by P0.13 and P0.14 per kWh, respectively. For the past six months, the savings from force majeure claims reached P2.4 billion.