Power stability, WESM and cheap electricity

Three of several important energy development in the country recently are related to our energy security, distribution continuity, and power stability. One, the House of Representatives passing on second reading of House Bill 10926 that seeks to extend the Manila Electric Co. (Meralco) franchise for another 25 years. Two, another successful competitive selection process (CSP) for 400 MW baseload need by Meralco which GN Power Dinginin (GNPD) leads with a low price of P7.6816/kwh. And three, low prices at the Wholesale Electricity Spot Market (WESM) of only P3.88/kwh for October billing.

Rep. Joey Salceda, a key sponsor of HB 10926, said in his sponsorship speech that Meralco has fairly complied with all the rules on CSP, low system loss charge, and thus provided its customers with “least cost, efficiency and reasonable price mandates.”

I will add that aside from least cost, it is power stability and dependability, avoidance of any blackout whenever possible that is the main contribution of Meralco and other dependable private distribution utilities in the country without tax subsidies and without patronage from political institutions like the National Electrification Administration. This kind of corporate continuity, less regulatory risks, and consumer protection via franchise extension will run from 2028 to 2053.

The CSP result of P7.68/kwh levelized cost of electricity (LCOE), meaning all-in generation cost including VAT and other taxes is good for customers. GNPD, once it is officially declared as winner for the power supply agreement (PSA) for 15 years after post-qualification evaluation, is obliged to keep that price flat from 2025 to 2040 despite yearly increase in prices of other consumer items. That is how CSP works for long-term protection of consumers.

The chairman of Meralco’s Bids and Awards Committee for Power Supply Agreements (BAC-PSA), Larry Fernandez, correctly summarized that “just like in the past, this CSP has fulfilled the objective of securing the needed power supply for customers at the least cost possible through an open and transparent process.”

The WESM price generation cost of P3.88/kwh in September to be reflected in the October billing would be the lowest price this year and this will contribute to lower inflation rate in October and likely until the end of the year. Data from the Independent Electricity Market Operator of the Philippines (IEMOP) which runs the WESM shows that there was huge supply margin (supply minus demand) of 6,649 MW in September, the highest this year as there were no large plant unscheduled outages. Good.

Grid-level data from IEMOP shows that Visayas grid has the lowest supply margin, average of only 306 MW out of average supply of 2,306 MW from April to September 2024. Thus, Visayas has the highest average price of P7.52/kwh over the same period, while Mindanao and Luzon grids have only P4.97/kwh and P6.14/kwh respectively. Therma Visayas Inc. (TVI) is planning an expansion of its coal plant in Toledo, Cebu to significantly augment power supply in the Visayas.

GNPD and TVI are both coal plants and both owned by Aboitiz Power (AP) Corp. Coal remains among the cheapest and most reliable source of electricity in the whole world, along with nuclear power. AP recently got a “three-peat” with Golden Arrow Award, three years in a row, for high score in compliance with corporate government standards and favorable standing with international best practices for publicly-listed companies. The award was given by the ASEAN Corporate Governance (ACG) and it was accepted by AP’s VP for Corporate Affairs Suiee Suarez, an always-smiling engineer and fellow UP alumnus.

For me, the biggest ESG contribution by AP is its maintenance of efficient coal plants like GNPD and TVI. The dirtiest and non-safe energy sources in the world is not coal but candles, or kerosene torch, or diesel gensets. Coal plants significantly avoid blackout and provide cheap electricity and hence, help people avoid using candles which can potentially lead to fires and destruction of lives and properties.

What about climate change? Planet Earth is 4.6 billion years old. There has been natural and cyclical climate change of warming-cooling ever since. Thus, it is natural or nature-made, not man-made climate change. The natural cycle never stops: El Niño-La Niña cycle, wet-dry season cycle in the tropics, winter-spring-summer-fall cycle in the North and South Hemisphere, water evaporation-condensation cycle, and so on.

As a developing country, we should focus on saving jobs and businesses for our people. We should focus on having ample supply of electricity, bright streets at night because dark roads often lead to more road accidents, more crimes and hence, more harm to people.

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