Quarantine grace periods weaken power firms’ finances as demand picks up

May 17, 2020 | 9:39 pm
from Business World

THE quarantine grace periods on electricity bills have weakened the power industry’s finances even with power demand surging in the residential segment and as usage normalizes with lockdowns easing, an industry association said.

“Like all businesses, there’s a financial impact on collections because of the ECQ, (which caused) delay in remittances payment extensions, collection efficiency, etc., naturally, revenues have significantly decreased while fixed costs remain the same,” Philippine Independent Power Producers Association, Inc. (PIPPA) President Anne E. Montelibano told BusinessWorld in an e-mail interview.

With the onset of enhanced community quarantine (ECQ) in March, the Department of Energy (DoE), along with the Energy Regulatory Commission, ordered a grace period for power bill payments in accordance with Republic Act No. 11469, or the Bayanihan to Heal as One Act.

Some suppliers were not able to offer flexible payment arrangements, she noted.

Fixed costs include labor, supplies, debt payments, insurance premiums, and maintenance.

Generation companies are still adjusting to the situation, she added.

“We continuously have to adapt and adjust because we have accepted that each must bear his part in ensuring that everyone in the power industry weathers this adversity together,” Ms. Montelibano said.

The DoE noted that power demand has been increasing in areas under ECQ, especially in residential areas, as people stay indoors and consume more electricity.

In Luzon, residential power demand rose 40%, while the commercial and industrial segments are below normal consumption levels, the DoE said, citing data from Manila Electric Co. (Meralco), the Philippines’ biggest distribution utility.

Meanwhile, the drop in demand in the Visayas and Mindanao, where the residential sector has an outsized share, has not been as significant as Luzon’s.

“’Yung share ng residential sector sa entire consumption ng ating system, medyo tumaas. Pero ’di niya na-compensate ‘yung pagbagsak naman from the commercial and the industrial sectors (Residential consumption has increased but was not sufficient to make up for the decline in commercial and industrial demand),” DoE Assistant Secretary Redentor E. Delola said.

The DoE said it is rushing the commissioning of power plants due to go online by June to ensure sufficient supply as the quarantine measures ease and industries resume operations.

There are 21 power plants currently under construction, the DoE said.

“Under the post-quarantine, lahat i-increase ang demand diyan, lahat ng mga hotels, services (all will increase their demand for power, including hotels and services firms) they will try to start their facilities and that will require a lot of power,” Energy Secretary Alfonso G. Cusi said.

“Hahataw ‘yan [demand] ‘pag dating ng post-quarantine, (After the quarantines end demand will surge) and we want to make sure that we have enough supply,” he added.

“We assure the public that we will continue to keep the lights on for the nation,” Ms. Montelibano said.

Only Cebu City and Mandaue City are still under ECQ while Metro Manila, Bataan, Bulacan, Nueva Ecija, Pampanga, Zambales, Angeles City, and Laguna are under modified ECQ up to the end of May. The rest of the country is under general community quarantine (GCQ).

2020 DEMAND PROJECTION UNLIKELY TO BE MET

Meanwhile, the Philippines may not meet the power demand projection set by the DoE for this year, while growth will be slight next year, Mr. Delola said.

“We’re seeing na baka wala tayong growth for the year. So, we’ll remain at the levels that we had sa 2019. Then by next year, baka maliit lang ang growth (There may not be any growth this year and only a small rise next year),” he said.

Specifically, the Luzon projection for this year is least likely to be met.

The DoE’s forecast for peak demand this year in Luzon is 12,285 megawatts (MW) in May, with the Visayas at 2,419 MW also in May, and Mindanao at 2,278 MW in December.

The department has yet to receive data on the electricity consumption by segment during the quarantine period, as distribution utilities have suspended meter readings in areas under ECQ.