Meralco urged to source more from Napocor

Energy Secretary Raphael P.M. Lotilla is urging the Manila Electronic Co. (Meralco) to source more of its power requirement from the National Power Corp. (Napocor).

“I’m looking forward to Meralco increasing its contracted volumes from Napocor,” he said.

Lotilla said if Meralco would hike the volume being sourced from the state-owned power generation firm, it could help in the privatization efforts of the government, specifically in the sale of the Napocor generation assets.

“This can assist Napocor and Power Sector Assets and Liabilities Management (PSALM) in attaching a higher level of supply contract,” he said.

Napocor and PSALM are attaching transition supply contracts (TSCs) to each power plant that would be sold to make it attractive to bidders. TSCs will be a guarantee that the power being produced by the power plant would have a ready market.

Aside from facilitating the privatization, the energy chief pointed out that if the Lopez-run power distribution firm will get more power from Napocor, its customers will not be exposed to price volatility in the electricity market.

Meralco is getting power from Napocor, its independent power producers and the wholesale electricity spot market. For the period January to June this year, Meralco is sourcing 30 percent of its power requirement from Napocor.

“Increasing their contracted levels will address the exposure of Meralco customers to the volatility of the spot market. I have not been remiss in issuing that reminder to the distribution utilities and I will continue to preach that,” he said.

Lotilla noted that as much as possible Meralco should not be trading much in the WESM. Lately, it was learned that Meralco has been sourcing 25 to 50 percent of its requirement from the electricity market.

 “That’s why the ideal situation really is to have as high a level of contractual capacity as possible and then have that assigned to the plants. But for as long as the distribution utilities do not provide such contracts, then generators will end up with uncontracted capacity — so it’s they themselves who are contributing to this situation of overcapacity. It’s not a one-way street. I would rather that Meralco signs up to 100 percent because there is still 10 percent from the WESM can still be there to provide for the imbalances. Then, you have all the captive market of Meralco adequately protected,” he said.

Last January, the Energy Regulatory Commission (ERC) granted a provisional authority for Meralco and Napocor to enter into a TSC.

The ERC approval noted that the TSC, which covers a five-year contract term commencing Nov. 17, 2006 until 2011, guarantees Meralco and its electricity consumers with a power supply of 6,600 gwh (gigawatt-hours) per year for the next five years.

The commission said the TSC will automatically expire at the end of the first year of existence of open access.

Based on the ERC approval, Meralco, at its option, may source power from Napocor in excess of the contract energy by not more than 20 percent.

“Any excess consumption will make Meralco pay Napocor an additional premium over and above the agreed contract energy charge plus other adjustments,” he said.

It would be recalled that the bidding for the two major assets of Napocor (Calaca and Masinloc power plants) failed due to the absence of TSC.