Archival wants to look into power supply deals

Veco official says rates are historically high during summer

Cebu City Councilor Nestor Archival wants to look into all applications for approval of power supply contracts filed before the Energy Regulatory Commission.

Archival also requested the House committee on energy in Congress to amend the Electric Power Industry Reform Act (EPIRA) to include a representative from the consumers group to sit as a member of the ERC to protect the interest of the consumers.

In a privilege speech during the council’s regular session this morning, Archival said he was concerned about the reported increase of P.20 to P.30 per kilowatt-hour in the generation charge of the Visayan Electric Co., Inc. (Veco) for this billing period as opposed to the P.90 to P1 per kilowatt-hour reduction in the generation rate of Manila Electric Co. (Meralco).

Both adjustments were affected by the prices in the Wholesale Electricity Spot Market (WESM), he said.

Archival, chairman of the committee on energy transportation, communication and other utilities, said he did a “technical analysis” on the contrasting adjustments of Veco and Meralco after his office was “bombarded” with questions from consumer groups.

He said Veco may have incurred an increase in line rental by WESM, which is the cost of transmission loss and cost of line congestion.

“The committee believes that the technical analysis explains why Meralco WESM price is low, – precisely because it did not incur high congestion cost and high line rental charges,” Archival said.

He said the Veco-WESM rate is high due to the high congestion cost and high line rental charges.

“This is to be expected if the power source is very far from the load or customer,” Archival said.

“Had Veco bought the power instead in Cebu or in Visayas, line rental charge could have been minimal and Veco power rates could have also been reduced by more or less P0.70 per kwh like that of Meralco,” Archival said.

He said Veco filed before the ERC an application for the approval of an Interim Power Supply Agreement (IPSA) with 1590 Energy Corp. for the supply of 30 megawatts from December 26 to June 25 this year. The 1590 Energy Corp. power plant is located in Bauang, La Union in Luzon.

“The great distance between the source and the load gives a high probability of congestion of the power flow. Line congestion cost results to high line rental charge for Veco when the power from the power source is unable (or limited) to flow towards its intended load, not to mention the big system loss charge inherent in a very far power source location,” the councilor said.

IMMATERIAL
Line rentals and the distance from the power source are a non-issue, said Veco chief operating officer Sebastian R. Lacson.

He said Veco’s generation charge for this billing period was high since it is summer and the spot market prices were quite high.

Prices in the spot market are driven by the law of supply and demand. Demand typically goes up during summer.

Lacson said, however, that spot market prices have gone down by an average of 15 centavos per kilowatt-hour. This would be reflected in the next billing period.

He said they entered into a short-term power supply contract with 1590 Energy to lessen their exposure in the spot market and avoid the high rates. Besides, he said there are no peaking power plants in the Visayas that they can contract with.

“Where it (1590 plant) is is immaterial. Line rentals are mathematical representations of congestion. They are not based on distance,” he said.

Lacson said line rentals between Luzon and the Visayas have been historically negative. The same can’t be said for line rentals from southern Cebu.

“The line from Naga (City, Cebu) to Cabancalan (Mandaue City) is extremely congested. It’’s one of the most congested transmission lines and it’s a very short distance,” Lacson said.

Baseload power plants in Cebu are located in the south.