In the absence of readily available capacity that it can procure via power supply agreement (PSA) underpinned by competitive selection process (CSP), power utility giant Manila Electric Company (Meralco) indicated that it will be left with no choice but to secure 260 megawatts (MW) of its required peaking capacity from the Wholesale Electricity Spot Market.

According to Jose Ronald Valles, first vice president and head of Distribution Utility Regulatory Management, “since there are no other offers, we have tried asking from different generators, but we have not received any favorable response from them.”

He qualified that if the company would be “unable to find a generator that is willing to supply the 260MW… we have to source it from the market to the extent that we need -- up to 260 MW.”

The implication of spot market sourcing, however, would come heavy on the pockets of consumers – especially at this time when WESM prices have been skyrocketing due to tight supply conditions in the grid.

Peaking capacity refers to the fraction of supply that a power utility must source so it can meet sudden surge in demand on its load network – and this is a recurring scenario during the summer months.

Valles narrated that to plug capacity gap on its peaking supply requirements, Meralco initially carried out an auction in March, but its bids and awards committee was prompted to declare “a failure of bidding for the second round of CSP.”

The company then opted to enter into a direct negotiation with the single bidder in its first round of competitive bidding – and that has been with San Roque Hydropower Inc. of the San Miguel group.

However, on April 13, San Roque formally informed Meralco that the plant “will not be able to generate the required portion of the target 260 megawatt peaking capacity due to El Niño.”

And while there had been other attempts to conduct another tender for its peaking capacity that will be critically needed within the remaining stretch of the summer months, Valles conveyed “Meralco did not receive any other offer from other power suppliers.”

A CSP is an auction process that distribution utilities will have to comply with in the procurement of power supply that it will utilize on extending electricity services to its roughly 8.0 million customers.

With the extremely dry season precipitated by the El Niño phenomenon, most if not all of the country’s hydro plants are unable to generate capacity; hence, their unavailability in the power system has to be plugged by generation from other technologies.

Luzon grid, in particular, had been recurrently distressed with red alert and yellow alert dilemmas in the past two weeks; and the resulting settlement prices in the spot market had been at record-high levels – and that only entails soaring electricity bills that the consumers will be paying for.