‘Power rates to remain volatile’

MANILA, Philippines - Electricity rates are seen to remain volatile and spikes will continue to drive inflation upward, GlobalSource Partners said.

“Limited power reserves particularly in Luzon imply that power rates will remain volatile going forward,” analysts Romeo Bernardo and Christine Tang said in a Market Brief.

“While the fluctuations will contribute to higher headline inflation every now and then, the overall impact may not be too worrisome considering that electricity, gas and other fuels form about seven percent of the CPI (consumer price index) basket,” the analysts added.

The analysts made the comment amid Manila Electric Co. (Meralco)’s announcement of a record-high electricity rate hike of P4.15 per kilowatt-hour last month.

Meralco said it would implement the rate hike in tranches in three months so as not to burden the consumers too much.

Meralco has said simultaneous shutdown of power plants it was sourcing from forced it to buy more expensive electricity at the Wholesale Electricity Spot Market.

Bernardo and Tang said that while the rate spike may be an “extraordinary one-time event,” the scenario sheds light on the thin reserves of the Malampaya platform, which supplies the bulk of Luzon’s requirements.

Citing data from the energy department, the analysts noted that power demand is projected to reach levels “critically close to the grid’s available capacity with supply deficits” as early as May this year.

“Hence, as demonstrated by events leading to the recent price spike, the risk of inadequate power, especially during periods of high demand and low capacity from hydro plants or supply interruptions, seems quite high,” the analysts said.

“More analysts are now warning of rotating blackouts, recalling the eight-hour long rotating power outages in Metro Manila in the early 1990s that cost the economy dearly in terms of lost output and foregone investments,” they said.

“This may happen as early as this summer if peaking plants are not deployed due to the lack of fuel arising from a prolonged payment interruption. A pity if this actually happens,” they added.