DOE reviews cost impact on PSAs of ‘replacement power procurement’

Published April 13, 2019, 12:00 AM

by manilabulletin_admin

By Myrna M. Velasco

As the double whammy of rotating brownouts and price spikes are now pestering Filipino consumers, Energy Secretary Alfonso G. Cusi has ordered the review and re-assessment of “replacement power procurement” as provided in the power supply agreements (PSAs) between the generation companies (GenCos) and the off-taker distribution utilities.

Energy Secretary Alfonso G. Cusi
Energy Secretary Alfonso G. Cusi

In particular, the department is looking into the manner of securing replacement power supply when a certain plant is on forced outage – and if the cost of such replacement power (especially if more expensive) is being passed on in the electric bills of consumers.

For instance, when a power facility suddenly breaks down and it has contractual commitments to supply to an off-taker (capacity buyer DU), that generating company can either secure from its other plants or from the Wholesale Electricity Spot Market (WESM).

It is not a secret though that prices in the WESM have been exponentially rising following the string of “yellow” and “red alerts” or the rolling brownout circumstances, hence, the power purchasing costs are ending up to be essentially higher.

The bigger problem may eventually transpire if price shocks will be inflicted upon consumers – similar to what happened in the industry’s “perfect storm” in November-December 2013 – wherein the simultaneous shutdowns of power plants had likewise been pointed to as the culprit in the targeted P5.00 per kilowatt hour increase in power bills. It was only averted that time because of a Supreme Court ruling.

“DOE is undertaking a review of ‘replacement power’ and ‘outage allowance’ provision in existing PSAs between the GenCos and the DUs to ensure their proper implementation,” the energy chief said.

The critical evaluation that the energy department must have on the warranted “outage allowance” of power plants shall be on the “scheme of penalties that must be enforced against the generation companies if they breach the level of their allowable outages – and if that has a pass-on provision also to the consumers.

This is already some sort of “too late the hero move” for the DOE, but the expectation of the consumers is for the Energy Secretary to really show results on this review plan and for the government to at least finally side with the Filipino ratepayers.

The other ‘quick fixes’ being dangled by the department are relatively unviable now that the grid has already been suffering from supply shortages.