Meralco buying higher priced power from WESM

Published December 7, 2022, 4:37 PM

by Myrna M. Velasco

Power utility giant Manila Electric Company (Meralco) has been compelled to source higher-priced electricity from the Wholesale Electricity Spot Market (WESM) to plug the gap on its baseload capacity needs due to the cessation of supply from the Ilijan gas-fired power facility of South Premiere Power Corporation (SPPC) of the San Miguel group.

According to Meralco Vice President Lawrence S. Fernandez, the prices in the WESM had been hitting a high of P7.0 to P9.0 per kilowatt hour (kWh) in the past couple of days, which is roughly twice more expensive compared to the fixed price baseload capacity contract for the Ilijan plant at P4.30 per kWh.

To ease cost-burden on the customers of Meralco, the company executive noted that “we maximize the other PSAs (power supply agreements), but mostly we resort to WESM.”

He added that spot market prices had escalated even further this week and in recent trading days because of the series of ‘yellow alerts’ that strained the power system; hence, that is expected to trigger spikes in settlement prices also at the WESM.

A ‘yellow alert’ condition in the electricity system entails deficiency in power reserves; and strained supply would often precipitate spikes in prices at the spot market.

Fernandez emphasized that within the 60-day duration of the temporary restraining order (TRO) rendered by the Court of Appeals (CA), “baseload capacity from Ilijan plant will be suspended.”

The Meralco executive, nevertheless, sounded off that “the cancellation of today’s yellow alert and declining demand as we approach holidays will lead to lower WESM prices.”

In a statement to the media, the power firm indicated that it is still “negotiating with other generation companies to secure the 670MW supply and shield our customers against volatile and potentially higher WESM prices.”

The company stated “our priority is to ensure continuity of stable, reliable and adequate supply for all our customers.”

The power firm further said it is “exhausting all efforts to mitigate any impact of these developments on our customers’ electric bills.”

In preparation for the high demand-months of summer, Meralco is targeting to secure additional 300MW of baseload capacity; as well as 180MW of peaking supply to meet any surge in demand as weather temperatures rise on this period.

The purchase of supplemental capacities had been proposed to be carried out via emergency power supply agreements (EPSAs), but that has yet to be approved by the Department of Energy.