Business cautions on govt’s power role

August 28, 2014 at 10:14

MAP backed implementation of the Interruptible Load Program — whereby big consumers can run their own generating sets to help meet demand — but with assurance of adequate compensation to participants.

“Only in the event that there is no guarantee that the foregoing measures would adequately address the impending shortage should government be allowed to contract additional generating capacity under Section 71 of the… EPIRA,” MAP said.

The said provision of the law states that “[u]pon determination by the President of the Philippines of an imminent shortage of the supply of electricity, Congress may authorize, through a joint resolution, the establishment of additional generating capacity under such terms and conditions as it may approve.”

MAP added that “any contracting of additional capacity must be limited to a period of two years and up to a maximum of 300 MW (megawatts).”

Peter Wallace, MAP Governor for the Energy Committee, said in a text message yesterday that MAP would support the exercise of the power crisis provision only if this will be used as the “last option.”

He added that MAP wants to limit the capacities to be contracted “so we don’t end up with expensive power we no longer need.”

Mr. Wallace added that these capacities should only be tapped during periods when there is supply shortfall since these are intended to serve only as “insurance.”

MAP is also pushing for the creation of a five-man committee — composed of representatives from business groups — to monitor the implementation of the law’s provision. “We further suggest that a five-member committee, composed of designated representatives of knowledgeable business groups, be convened to monitor the implementation of Section 71,” MAP said in its statement.

The Luzon grid is expected to have a power supply shortfall of around 200 MW in May next year. Hence, the government is exploring options as early as this year to avoid or minimize power interruptions.

Energy Secretary Carlos Jericho L. Petilla said via text message yesterday: “This is still the projected shortfall, but to be comfortable with reserves, we need guaranteed capacity of around 500 MW.”

The Energy department earlier this month sought endorsement of the Joint Congressional Power Commission (JCPC) for the government to contract additional power generation capacities through the Power Sector Assets and Liabilities Management Corp.

JCPC has been considering other options to address the expected power problem without invoking the EPIRA’s power crisis provision.

In its statement, MAP also reiterated its proposal to lift the secondary price cap that was put in place by the Energy Regulatory Commission to shield consumers from supply-related volatility that drives prices in the Wholesale Electricity Spot Market (WESM).

The P6.245 per kilowatt-hour (/kWh) secondary cap was put in place as a mitigating measure to help avert price spikes in WESM during summer, when prices are most vulnerable to supply-related volatility.

Implementation of the secondary cap was supposed to lapse last June, but the regulator extended it until December as it looks for a permanent mitigating measure that will replace this mechanism.

The P6.245/kWh secondary cap kicks in once an P8.186/kWh average is hit over a 72-hour period. These levels were computed based on historical summer prices, with allowance for three intervals hitting high market clearing prices.

The WESM currently has a P32/kWh offer limit — an interim cap that is almost half of the P62/kWh originally set when the market started operations in 2006.

MAP argued that the secondary cap “deters the entry of new and existing peaking plants by effectively disallowing them from recovering fuel costs.”

Acknowledging lawmakers’ and consumers groups’ call for EPIRA amendments, MAP once again bucked the proposal, arguing this could result in regulatory uncertainty for the investors in the energy sector.

“We wish to reiterate MAP’s previous position that the EPIRA should not be amended at this point in time as it would not solve the country’s most pressing concern — lack of power supply,” the statement read.

“Some proposed changes can be made by amending the EPIRA IRR (implementing rules and regulations), but amending the law itself would only introduce uncertainty into the regulatory regime of the power industry,” it added.

International and local investors and financial institutions would not invest in an industry where the rules are not known and stable.”

Finally, MAP said it does not support the Energy department’s plan to shift to an Independent Market Operator (IMO) for the WESM to replace the Philippine Electricity Market Corp. (PEMC). Headed by Mr. Petilla, PEMC is composed of 15 members, who represent key sectors of the power industry.

The Energy chief said earlier this year that the transfer of the WESM to an IMO would dispel concerns of government intervention in market operations.

MAP claimed that the draft circular of the Energy department on the shift to an IMO “did not obtain the endorsement of the electric power industry participants as mandated by the EPIRA.”

“For these reasons, we reiterate our previous objection to the proposed IMO,” it added. — Claire-Ann Marie C. Feliciano