No end in sight for higher power rates in Mindanao

CAGAYAN DE ORO CITY (MindaNews/18 October) — Higher power rates will likely continue to hound consumers with petroleum-based fuels getting more share of Mindanao’s power grid even as the Department of Energy has issued a directive on using all available generation capacity in the next 45 days to plug the island’s power shortage.

Energy Secretary Jose Rene Almendras has issued Circular 10-0011 “mandating the rational utilization of all available capacity in Mindanao and directing attached agencies, National Grid Corporation of the Philippines and all industry stakeholders” to help address the power supply situation in Mindanao.

The Circular also directed the NGCP, the private concessionaire of the country’s power grid to use “any and all available capacity for 45 days to maintain load generation balance in the region to meet the demand for energy at any given time.”

At the height of the power shortage, in March to June this year, the NGCP sourced 100 megawatts from the power barges of Therma Marine Inc. (TMI) in Nasipit, Agusan del Norte and Maco, Compostela Valley as ancillary service suppliers. The two barges have a combined generation capacity of 200MW.

In a ruling dated Oct. 4, the Energy Regulatory Board ruled however that the Aboitiz-owned TMI cannot be dispatched as an ancillary service but only as regular baseload generation plants of the National Power Corporation before it was privatized in favor of TMI in 2008.

The TMI had passed on to NGCP and eventually the power consumers over half a billion pesos in additional charges for ancillary services from March to May this year.

The Energy and Power Industry Reform Act (Epira) defines ancillary services as “those services that are necessary to support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the transmission system in accordance with good utility practice and the Grid code to be adopted in accordance with this Act.”

Ancillary services are more expensive than regular or baseload generation plants as the ancillary charge is on top of the regular generation cost consisting of operation and maintenance of the power plant plus fuel and oil adjustments.

Almendras, however, said that despite the ERC ruling, the TMI power barges can be dispatched as baseload plants.

Mindanao which traditionally has lower electricity rates due to its hydroelectric power plants may have to face the reality of having higher rates as the share of expensive petroleum and coal-fired power plants increase their share in the Mindanao grid.

Power generated from hydroelectric sources costs less than P4 per kilowatthour, while those from fossil fuel-fed power plants are generated at above P7 per kilowatt hour.

Generation capacity is the main problem of the Mindanao power sector with energy reserves below the 13-percent threshold.

Currently the power reserve in the island is about seven percent. At this level, the Mindanao power grid is very sensitive to outages if problems occur in the existing power plants.

Based on DOE figures, as of this year, the island has a dependable capacity of 1,749MW, a required capacity of 1,948MW and a peak demand of 1,610MW.

According to Abante Mindanao (Abamin) Party-List Rep. Maximo Rodriguez, “Mindanao’s power deficiency is long-term. Lack of base generation capacity had been foreseen in the last three to five years. No adequate investors and power developers have invested in Mindanao to meet the power demand growing at 4% to 5% annually.”

At this rate, Mindanao will have a power generation shortage of about 500MW in 2014.

Several power generation plants are in the pre-development stage, among them the 132-MW run-of-the river Bulanog-Batang Hydro electric power plant in Cagayan de Oro and Talakag, Bukidnon; the 200-MW coal-fired power plant proposed by Conal Holdings in Maasim, Sarangani;

the 200-MW coal-fired power plant proposed by Aboitiz Power in Davao City; and the 300-MW Pulangi V hydroelectric power plant in southern Bukidnon and North Cotabato proposed by the First Bukidnon Electric Cooperative and Greenergy Development Corp.

Power plants need between two and six years to construct. (BenCyrus G. Ellorin/MindaNews)