NAPOCOR ex-boss warns on power price scheme

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NAPOCOR ex-boss warns on power price scheme

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Former National Power Corporation (NPC) President, Guido Alfredo A. Delgado urged the Bohol Energy Development Advisory Group (BEDAG) to review the present price matrix for power generation contract rates that would be beneficial for Boholano consumers in the long term.

Delgado pushed for fixed long term contracts or a mix of floating and fixed contracts and delete provisions with “pass on” fuel price and foreign exchange adjustments to consumers.

WRONG MATH

According to the former NPC head, “the current methodology of calculation of real costs of generation power rates is wrong” appealing to the Energy Regulatory Commission (ERC) and the Distribution Utilities (DU’s) to “use the correct formula to protect the consumers.”

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Without delving into the complex mathematical nuances of determining the most advantageous electric rates for the consumers, Delgado zeroed in on the “deceptively cheap” electric retail rates based on a floating cost where the consumers are left helpless against the volatility of the international fuel market.

HEAVY BURDEN

According to Delgado, electric end-users – fishermen, farmers, teachers, businessmen are all earning in pesos and “do not have the competence nor knowledge in knowing, controlling fuel costs yet they are made to shoulder or “pas-an” fuel and foreign exchange risks.”

Most sources of fuel are overseas and purchased at international prices and are subject to foreign exchange risk.

 Under Republic Act (RA) 9163 known as the Electric Power Industry Reform Act (EPIRA)) of 2001 generation companies and distribution utilities are protected from price swings of their imported fuel and foreign exchange risk through a “pass on” mechanism to end users.

POTENT MIX

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In an emergency BEDAG meeting on July 19, 2017, with Governor Edgar Chatto, Delgado expounded on the difference between a fixed term power supply contract against the current floating rates.

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Using a theoretical model, Delgado showed that a floating price at the current cost of a PhP4.73/kilowatt hour will balloon into a real cost of PhP5.92/kilowatt hour considering the weakening of the peso and the increase by 64% this year of imported coal from Indonesia.

In comparison, Delgado explained that a fixed price long term contract of PhP5.50 will still be PhP5.50 within the contracted number of years insulating Boholanos from the volatility of foreign exchange and unpredictable price swings of imported fuel.

However, this ideal retail electric rate can be realized with a fuel mix of fossil fuel such as coal and renewable energy ( geothermal and hydro) since geothermal is value added tax (VAT) exempt, abundant locally therefore free from the grip of foreign exchange fluctuations and imported fuel price movements.

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Showing his preference for renewable energy, Delgado claimed that broader participation of renewable energy in the power market would drastically address the high power cost in the country.

IMPORTED FUEL

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On January 15, 2016, the One Bohol Power Joint Competitive Power Supply Procurement awarded to First Gen a short term supply agreement of PhP4.824324328 effective levelized price (ELP) per kilowatt hour while GN Power bagged the mid-term supply with an ELP of PhP4.008996034.

Both companies will supply the uncontracted demand that Bohol’s two electric cooperatives – Boheco 1 and 2 are obligated to procure to supply their captive customers, according to the Bohol Island Least-Cost Power Supply Plan. 

The uncontracted demand for Bohol in 2016 was predicted at 35MW and is expected to rise at 68MW by 2024.

These figures were culled from the projected total power requirements up to 2043 from the BEDAG Technical Working Group created by Chatto under Executive Order 13 series 2014. 

LAND BASED

Delgado was in Bohol to offer a modular land based generator set as an alternative to power barges serving as a temporary source of power supply to ease power shortage even up to 2024 with the expected completion of a baseload power plant in the province.

According to Delgado, the more than 40-year-old power barges, as an alternative source of power is “inefficient and unreliable” as compared to the “newer modular gen-sets.”

The Chronicle learned that mooring and transmission line connections are hampering the immediate use of the power barges that are to be towed from their location in Western Visayas.

The advantage of modular gen-sets, according to Delgado is the speed of installation and the relative ease of setting up the equipment near the DU’s substation.

Delgado told BEDAG that modular gen-sets with up to 100 megawatts can be made available including a 10-megawatt gen-set for the island of Panglao which was welcomed by tourism stakeholders.

Pricing schemes for the modular gen-sets are competitive or even lower than the power barge with the interest of the consumer as a prime consideration, according to Delgado. (Chito M. Visarra) 

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