15 Feb 2014
"MERALCO and Aboitiz Power's whole-owned subsidiary Therma Mobile Inc. cannot believably complain that they have been deceived that Malaya Thermal Power Plant (Malaya) was trading and being dispatched in the Wholesale Electricity Spot Market (WESM) bidding process during the 2013 Malampaya gas facility shutdown, as WESM trading participants have known or ought to have known that such has not been the case," Power Sector Assets and Liabilities Management (PSALM) Corporation President and CEO Emmanuel R. Ledesma, Jr. stated.
MERALCO and Aboitiz Power, especially since they are market leaders in the industry, cannot convincingly claim ignorance of Malaya's consistent special role for the last three years as only a Must-Run Unit (MRU), which has operated upon the instruction of the National Grid Corporation of the Philippines (NGCP) to prevent brownouts in case of insufficient power supply or to provide grid voltage support in view of the proximity of Malaya to Metro Manila. Since January 2010, Malaya has run only as an MRU for an aggregate period of 454 days. The WESM rules define an MRU as a generating unit identified by NGCP to be on-line on a particular WESM trading interval to address requirements for system security, which is the "safe scheduling, operation and control of the power system on a continuous basis in accordance with the system security and reliability guidelines under the Grid Code", and other important considerations.
Moreover, that Malaya has been dedicated as an MRU has been discussed in the Malampaya shutdown coordination meetings organized by the Department of Energy (DOE). It likewise bears emphasis that the way the WESM trading works is that the sellers and buyers in the WESM are blind to the seller's bid offers, including that made for Malaya, until after at least seven (7) days from the subject market clearing day. In any case, day-after Real-Time Dispatch reports released by the Philippine Electricity Market Corporation (PEMC), the market operator, would always show that the volume at which Malaya was dispatched the day prior has consistently been at 0MW. If Malaya was trading in the WESM, the volume stated should at least be at Malaya's minimum stable load (Pmin).
Given that MERALCO/Therma Mobile Inc. knew full well that Malaya has not been trading in the WESM based on the foregoing facts, it should have bid lower than the P62/kWh bid made, or in an amount that was for the best interest of the consumers, especially during off-peak hours when price should be low. While the purported intention to bid high at off-peak was to avoid dispatch, the fact that the bid cleared many times should have already been enough reason to change the supposed strategy, and bid low. It should likewise not have bid at P62/kWh on peak hours, when supply was needed, demand was high, and dispatch was expected, especially since Therma Mobile Inc.'s plant is said to be a peaking plant, the dispatch of which should be ensured to comply with its power supply agreement. MERALCO/Thermal Mobile Inc., however, repeatedly bid at P62/kWh for both peak and off-peak hours. It should not have also bid at P62/kWh beginning December 2, when Malaya was already called to run as an MRU precisely because there was already insufficiency of supply. The P62/kWh bid was hinged on the erroneous assumption that Malaya was trading in the WESM, and based on the supposed intention to avoid Therma Mobile Inc.'s plant from being dispatch, which only presumes a sufficiency of supply.
MERALCO/Therma Mobile Inc. had the choice and repeated opportunity for thirty days to bid low throughout the 2013 Malampaya shutdown, especially since they claim that their power supply contract is already fully contracted and thus has no excess volume for WESM trading. Even without Malaya being traded and dispatched in the WESM, competition could still exist in the WESM. At the same time, without Malaya being traded and dispatched in the WESM, energy security was ensured as Malaya was reserved for must-run purposes. If Malaya were traded and dispatched in the WESM at full capacity during the 30-day 2013 Malampaya shutdown, Malaya would have run out of fuel on the 28th day. As a result, Malaya would not have been available as MRU on the 29th and 30th day, or in case of an extended Malampaya shutdown or an unexpected contingency happens.
In view of the foregoing, the MERALCO price hike was well within the control of MERALCO/Therma Mobile Inc. It is thus incorrect to say that Malaya's non-participation in the profit-making aspect of WESM caused the MERALCO price hike. ###
Strategic Communications and Partnership Division |