Brace for another power hike

CENECO sent out a press release yesterday stating that Kepco, one of its power suppliers, experienced some trouble in one of its power generating units and had to shut off the affected unit last Monday, June 25, until the problem is addressed.

Complicating Kepco’s woes is the ongoing preventive maintenance of another generating unit which is projected to come online on July 10 yet.

The trouble in one of its generating units and the preventive maintenance of another unit limit Kepco’s generating capacity. Thus, it cannot provide all the power it contracted to supply not only to Ceneco but also to other electric cooperatives (ECs) with which Kepco has a power supply agreement.

If Kepco has limited power to supply to electric cooperatives, then the ECs, which are simply distributors of electric power in the power supply chain, have limited power to supply to its consumers.

In the case of ECs, the simplest solution to the problem of limited power supply is rationing or, in industry parlance, load shedding. You just make do with the available power.

If the peak load is, for simplification purposes, 100MW from 6pm to 9pm while the available power is only 80MW, then you just rotate the shortfall within the coverage area. For example, you withhold the supply (cut-off the power) to Bago from 6 p.m. to 7 p.m., to Murcia and Don Salvador Benedicto from 7pm to 8pm and to Bacolod from 8 p.m. to 9 p.m.

Simple. It takes just a flick of a switch in the power substations to isolate (or cut off power supply to) a certain area. However, if the ECs resort to load-shedding as the easy way out, they will get the consumers’ ire.

Moreover, it is not in the interest of ECs to cut off power supply, unless it is absolutely necessary or unless there is nothing they can do to prevent it.

For ECs, the KWHr meters are their “cash registers.” If there is no power, then the cash registers won’t ring. Power interruptions of any kind are therefore not exactly in the best interests of ECs.

Aside from the reduced revenue from power interruptions, ECs will also have to contend with the anger of consumers who don’t need much excuse to curse the ECs.

Thus, to address this power shortage brought about by Kepco’s problems, Ceneco has no choice but to source its lacking power requirement elsewhere.

Under the prevailing set-up in the power industry, Ceneco has to purchase its power through the Wholesale Electricity Spot Market (WESM).

“To ensure the continuous supply of power to its consumers, and avoid the occurrence of load shedding, Ceneco opted to get power from the Wholesale Electricity Spot Market (WESM). However, this would mean an increase in the rates which will affect the July 2012 billing, since WESM rate is higher than Ceneco’s contracted rate with KEPCO SPC,” stated Ceneco in its press release yesterday.

WESM was created under the Electric Power Industry Reform Act (EPIRA), ostensibly to provide a venue for the free and open trade of electric power. EPIRA envisions WESM to be the trading floor where consumers can exercise their right to choose the lowest priced power supplier.

Under the actual set-up, however, consumers (in this case, ECs) end up wondering why WESM bills them a higher power rate than what the ECs originally contracted through WESM.

Admittedly, WESM is not a charitable institution nor are its employees rendering a labor of love. To sustain its operations, WESM charges a very miniscule fee of just a couple of cents (or is it less than a cent?) for every KWHr of electricity traded through it.

The amount is so small that you can bet it is not the cause of what Ceneco said will be the higher rate between Kepco and WESM rates.

Let’s reserve WESM dynamics for another column. For now, just brace yourself for an increase in your July electric bill. If June’s effective rate for residential consumers is almost P10 per KWHr, then expect to pay more next month.