LOOSE CHANGE: The power spot market

DAVAO CITY (MindaNews/28 September)—Last Thursday, Mindanao was supposed to have started adopting the much-talked about Interim Mindanao Electricity Market, an idea of government as its way of solving the power deficiency in the island.

This scheme is an alternative way of delivering power between the generators and the consumers. In this case, since the power coming from the usual suppliers – the likes of the government-run National Power Corp. and other big-ticket generators – are already committed, the company that will serve as intermediary between the generators and the distributing utilities, the non-stock Philippine Electricity Market Corp., will consolidate all the power coming from generating sets and sell this to those utilities whose requirement cannot be filled with what is coming from usual sources.

The owners of generators in this case are those company that, in case of enough supply, use their facilities only when needed. The P36 per kilowatt-hour rate that the Energy Regulatory Commission approved last week took into account the fuel recovery cost as well as the maintenance cost of the generators.

In 2010, the Davao Light and Power Co. employed a similar scheme after it got the commitment of some big power users as the city, just like the rest of Mindanao then and now, was experiencing rotational brownouts of two hours. In those days, the city, just like now, was insulated from the continuing power problem that has been haunting other Mindanao areas, particularly the urban centers.

The very significant differences between the Davao Light scheme and the mechanism at present include the imposition of the maintenance cost as well as the presence of the consolidator, which will facilitate the delivery of the needed power to those needing it on a daily basis. In the 2010 scheme, the contract between the generators and the distributing utility was on a monthly basis.

The regulator-approved rate, on the other hand, will not be the rate that consumers will pay because this will be blended with the usual rates from the so-called baseload suppliers like the NPC and the ancillary suppliers, including the Therma Marine Inc., the Aboitiz Power Corp. subsidiary that operates the two power barges that have a combined capacity of 192 megawatts.

Based on the average rates, the government hydroelectric plants collect about P5 a kilowatt-hour, while Therma Marine, being bunker-fuel fed, has about P9 a kilowatt-hour rate. Since the power coming from the spot market will be very small- enough only to fill the void that could not be filled by the usual sources – the argument is that the rate could not go as high as P14 a kilowatt hour, although this has remained to be seen.

But for those opposing the scheme, mainly the Mindanao Business Council and the Association of Mindanao Electric Cooperatives, the latter being the association of the very distributors that will tap the market, this is not yet the time to impose it.

For one, both argued that the pricing was very high, even higher than what was set for the solar power which, based on the fit-in tariff scheme, was pegged at P18 a kilowatt-hour.

The other issue is implementation as Vicente T. Lao, chair of the business council, argued that it is very difficult to implement the system because of the absence of the mechanism for it.

Also, by 2015 when both the Therma South Inc. and Conal Holdings Corp. will have started operating their coal-fired power plants, about 500 megawatts in combined capacity, the mechanism will be useless unless it can bring the power rate below P5 a kilowatt-hour.

Another argument is that if Davao Light was able to do it in 2010, why can other areas not use the same scheme instead of tapping a consolidator that, even if non-stock non-profit, will still need resources to function based on its mandate.

Mindanao will have ample power by 2015 as analysts even predicted that by 2018, it will have power surplus as other big companies have also been busy having their applications to build power plants approved.

So will the needed resources justify the outcome in imposing such scheme? You be the judge, dear reader. (Mindaviews is the opinion section of MindaNews. Carmelito Q. Francisco is managing editor of Mindanao Times, a daily community paper based in Davao City.)