STATE-OWNED National Power Corp. (Napocor) yesterday said it was not overcharging the country’s largest electricity distributor for power transmission line costs, but said the order by regulators to refund was “welcome.”

In a statement, Napocor spokesman Dennis S. Gana said the state firm merely follows its supply contract with the Manila Electric Co. (Meralco) and other utilities.

Mr. Gana said the contract stipulated that generation charges based on “time of use” rates approved by the Energy Regulatory Commission (ERC) must include adjustments to “reflect the incremental increase or decrease in the actual transmission line cost,” among others such as the Deferred Accounting Adjustment and Incremental Currency Exchange Rate Adjustments.

Napocor charges distribution utilities for losses incurred while transmitting power at a rate of 2.98% of the generation charge. Under current rates for Luzon, this system loss charge could range from 6.9 centavos to 19.4 centavos per kilowatt-hour (kWh). Last month, Meralco bought 906 million kWh from Napocor.

At the same time, however, Meralco and other utilities buying power at the Wholesale Electricity Spot Market (WESM) are required to pay line rentals for power obtained from Napocor.

In a 2008 complaint to the ERC, Meralco said this constituted double-charging for Meralco and “all distribution utilities similarly situated.”

Meralco claimed this was not the case with private power suppliers.

Things came to a head when a transmission line and substation in Bulacan broke down in 2008, leading to congestion and outages. Spot market prices jumped to P33.53/kWh, jacking up transmission line rentals.

Mr. Gana pointed out that while the time of use rates overlap with the WESM charges set at the start of market operations in 2006, these were all cleared by regulators.

Meralco could not be reached for comment.

Mr. Gana said the ERC’s decision last March ordering a refund was still welcome as this would allow Napocor to collect the 2.98% system loss charge from utilities that are not officially members of the WESM.

In the March 10 decision released to the public last month, the ERC said: “If the line rental transmission loss component is more than the 2.98% transmission loss cost in the [Napocor’s time of use rates, Napocor] should bill the distribution utility or any party with a contract with [Napocor] the incremental adjustment to reflect the actual transmission line cost. On the other hand, [Napocor] should implement a refund if actual transmission line loss is less than the 2.98% loss factor.”



A provisional approval of the Energy Regulatory Commission (ERC) is being sought for the power supply agreement (PSA) inked by AP Renewables Inc. (APRI) of the Aboitiz group with that of Camarines Sur Electric Cooperative Inc. (CASURECO IV).

The supply pact requires the power generator to deliver power to CASURECO IV until January 25, 2013 within the prescribed contract energy.

It was stipulated in the deal that “the total minimum contract energy to be supplied by APRI to CASURECO IV for each month of the contract period will range from a low of 2,496,702.55 kilowatt hours to 3,314,899.13 kWh.”

Power supply will come from the Tiwi geothermal plant in Albay, which forms part of the 747-megawatt geothermal facility acquisition of APRI that included the Makiling-Banahaw plants in Laguna.

“APRI shall supply the contract energy at the Tiwi geothermal power plant. Line rental charges and transmission fees for delivery and transmission of the contract energy shall be for the account of CASURECO IV,” the PSA stated.

It has been emphasized that the transmission service agreement (TSA) between CASURECO IV and the National Grid Corporation of the Philippines (NGCP) as well as the TSA between APRI and NGCP are currently being negotiated.

The electric cooperative noted that it selected APRI because of its capacity to supply its power requirements. Three parties have made offers, but the two are reportedly aggregators, hence, they do not own or operate power plants which could have been the ultimate assurance that they can meet the electric coop’s demand.

The PSA further provides that should CASURECO IV decides to reduce its contract energy, “it shall pay APRI a buy-out charge equivalent to P2.00 per kWh multiplied by the foregone contract energy for the remainder of the term of the PSA.”

Based on calculations provided to the ERC, the proposed rates to be charged by APRI to the electric cooperative would be P4.4758 per kWh during Mondays to Saturdays and P2.7284 per kWh on Sundays and holidays.

A comparative analysis also emphasized that if compared to the rates that should have been charged by state-run National Power Corporation (NPC) at P4.8309 per kWh, the APRI charge employing the same formula would be lower at P4.3655 per kWh.


Electricity consumers may continuously expect relief in their electricity bills in the coming months as prices at the Wholesale Electricity Spot Market (WESM) started showing downtrends.

In update report issued by market operator Philippine Electricity Market Corporation (PEMC), it was indicated that clearing prices are now trailing as low as P1.00 per kilowatt hour (kWh) and peak prices have also been softer at P6 to over P8 per kWh, way below the all-time high average price of about P12 per kWh logged in March.

It must be noted that the high prices at the WESM stirred controversy in the rates billed by Meralco in March to April, that it almost ignited consumer revolt because of the drastic up-ticks in its generation charges for those billing months.

Sentiments from price-sensitive consumers though were eased after the generation charge component in the billing of the giant utility firm started going down in May billing.


Incoming Manila Electric Co. (Meralco) president and CEO Manuel V. Pangilinan has revealed plans to go into power generation as one of the key ways to bring down electricity rates.

On the sidelines of yesterday’s PLDT stockholders’ meeting, Pangilinan said that in order to go into the business of power generation, Meralco may buy into an existing power generation facility or put up its own.

“These have to go hand in hand, us going into power generation and bringing down electricity rates,” he emphasized.

Pangilinan noted that it is only through Meralco getting into the generation part that it can have some control over the price of electricity. “Otherwise, we do not have any control,” he said.

He said one option is to tap a partner while another is going into power generation alone. “We can also buy into an existing power generation company or bid for a power plant, whatever is available,” he added.

Pangilinan emphasized that bringing down electricity rates cannot happen overnight, but is a long process. He, however, stressed that the distribution charge is only 20 percent of the bill. “The rest is beyond our control.”

Aside from going into power generation, he disclosed that another priority is to improve operational performance and reduce systems loss, which currently stands at eight percent to 8.5 percent. System losses can be technical, or those losses arising from electricity being dissipated over power lines, or non-technical such as those losses resulting from pilferages.

Earlier, Meralco revealed it is in talks to acquire generating assets and supply contracts to remain competitive when customers are allowed to choose among suppliers.

Former Meralco president Jose de Jesus said they need some generation capacity when they get into ‘open access.’ According to him, customers who require at least one megawatt of electricity will be allowed to choose their own suppliers as early as next year.  This comprises about 25 percent of Meralco’s power sales.

Meralco used to be engaged in the generation business until it was forced to give this up decades ago.

Among the parties Meralco is in talks with are owners of privatized National Power Corp. (Napocor) assets for prospective equity take on their acquired power generation facilities.

De Jesus has said that preference would be the generation assets embedded within their franchise area.

He revealed that the company was prompted to venture into the generation side of the power business in consideration of the tightening supply situation in the grid, especially with the much-anticipated supply-demand crossover which may come as early as 2011 or 2012.

“We are looking into acquiring some generation assets. Especially now when we go into open access and retail competition, we will need our own source of supply. Because what we now have is not even sufficient for our captive market, so we need to add some,” De Jesus earlier said.

Captive market would refer to the segment of customers, such as residential end-users, which shall be retained under Meralco’s service domain because they are not qualified yet to source their own supply. The first wave of competition in the market is targeted within the range of end-users having at least one-megawatt peak demand, also categorized as contestable market.

Apart from meeting the requirements of its own customers, Meralco also dropped hints of selling to other end-users, with its planned venture as retail electricity supplier (RES) or those entities licensed by the regulator that can directly contract or sell capacity to customers.

De Jesus said the choices they have would be to either enter into bilateral contracts with power generators or to have their own generation assets. But he noted that with supply reliability being a recurrent dilemma in the grid, they see it more prudent “providing for our own requirements.


US-REGISTERED FIRM CLENERGEN CORP. is putting up in the country facilities that will produce renewable fuels from biomass materials like wood chips, which it also plans to use to provide electricity in rural and off-grid areas in the country.

The company is likewise planning to establish tree plantations that will become the major source of wood for processing to wood chips and conversion into renewable fuels.

In a briefing Tuesday, Clenergen CEO Mark LM Quinn said the country has the right climate conditions and available land to grow the trees needed for the production of the wood chips.

“The future implications of this technology offer a sustainable source of renewable power for both the consumer and captive end-users,” Quinn said.

Quinn said the company was planning to convert wood into several products such as wood chips for planned biomass power plants; pellets or liquid fuels for co-firing with coal or downstream processing to pyrolysis oil, and hydrocarbon fuel for the production of renewable diesel, jet fuel and gasoline.

These products, he added, could be produced for both domestic distribution and export to industrialized nations.

In a particular, Clenergen is eyeing to forge agreements with companies based in Japan, Korea and Africa for the supply of renewable fuel from wood chips. Earnings from these agreements are expected to help fund its planned power plant projects in the Philippines, he added.

So far, Clenergen has signed agreements with state-run National Power Corp. and the Romblon State University.

Signed last year, the agreement with Napocor called for the establishment of biomass power projects for the state-owned firm’s Small Power Utilities Group (Spug).


Diversifying conglomerate San Miguel Corp. has expressed interest in putting up a coal-fired power plant within the concession area of PNOC-Exploration Corp. in Kawayan, Isabela, according to a PNOC-EC official.

PNOC-EC president and CEO Rafael del Pilar told reporters that they have been discussing with San Miguel either a partnership for the construction of the proposed power facility or a coal supply agreements covering coal operating contract (COC) No. 122 in Isabela.

“San Miguel continues to be interested in our project but we haven’t signed any definitive agreement with them,” Del Pilar said.

“They want us to make an offer. They’re interested in us supplying them (the coal). They will put up a power plant in that area. We will own the mine and they will own the power plant. That’s where our discussions are leading to,” he further disclosed.

According to Del Pilar, PNOC-EC has recommended for the construction of a 50-megawatt (MW) coal fired power plant, which can be further expanded to generate as much as 100 MW.

Should the deal push through, San Miguel and PNOC-EC will have to spend at least P1 billion for a 100-MW power facility.

San Miguel has been aggressively acquiring coal mines throughout the country as it targets to further strengthen its presence in the power generation industry.

Recently, San Miguel bought three coal mines in Mindanao, with resources capable of generating an initial 1,200 MW. These were Daguma Agro Minerals Inc., Bonanza Energy Resources Inc. and Sultan Energy Mining and Development Corp.

The aggressive acquisition of coal mines is said to be meant to further ramp up generating capacities of San Miguel’s planned coal-fed plants in Mindanao, which has been experiencing a shortage in supply since the beginning of the year.

San Miguel president Ramon S. Ang earlier said that the company had been planning to put up a 300-MW mine mouth coal power plant in General Santos City following its acquisition of Daguma’s coal mine. A 300-MW coal facility would need about 750,000 tons of coal a year.

The conglomerate is likewise eyeing other prospective sites in Luzon, including Bataan, where it also plans to put up another coal power plant, which is capable of generating some 600 MW.


OIL MAJORS Pilipinas Shell Petroleum Corp., Chevron Philippines, Inc. and Petron Corp. have raised pump prices of all petroleum products to reflect higher international oil prices.

In separate text messages, the companies said prices for diesel, regular gasoline, premium gasoline and kerosene were adjusted by P1 per liter effective yesterday.

Phoenix Petroleum Philippines, Inc. also increased prices by P1 “in view of the rise in prices of refined petroleum products in the international market.”

With the price increase, unleaded gasoline now retails at P40.720-P42.50 per liter with a common price of P42. Diesel is sold at P32.65-P33.85 per liter with a common price of P32.50. Kerosene is selling for P39.43 to P44.05 per liter.

Benchmark Dubai crude is selling at $73 per barrel. Unleaded gasoline is selling for $81 per barrel compared with $85 in April, while diesel costs $90 per barrel from $96 last month.