1-PESO SLASH POSSIBLE: City council to push ERC to approve MORE Power’s geothermal deal

By John Noel E. Herrera and Francis Allan Angelo

A member of the Iloilo City Council will push for a resolution urging power regulators to hasten the approval of the 20-megawatt geothermal power supply agreement (PSA) between MORE Electric and Power Corp. with First Gen-Energy Development Corp (EDC).

Councilor Romel Duron believes that the PSA will reduce electricity rates in Iloilo City as geothermal is cheaper than coal-fired power plants.

Duron bared this move during a special session conducted by the Sangguniang Panlungsod (SP) on Oct 20, 2022 where MORE Power explained the reasons behind the sudden spike in electricity.

MORE Power President and CEO Roel Castro said they are hoping that the Energy Regulatory Commission (ERC) will approve the PSA as soon as possible in order to reduce power rates by at least P1 per kilowatt-hour (kWh).

Castro signed the 5-year PSA on June 27, 2022, in Pasig City. Signing on behalf of EDC were First Gen Vice President for Power Marketing and Trading Carlos Vega, and VP for Business Development of EDC Marvin Bailon.

Iloilo City’s sole power distributor will purchase 20 megawatts (MW) of geothermal power from EDC starting July 26, 2022, or once the ERC has approved the contract, which will serve as a mid-merit load.

MORE Power sought other power suppliers because its 1-year contract with Power Sector Assets and Liabilities Management Corp (PSALM) ended on July 25.

Last April 26, 2022, MORE Power conducted a Competitive Selection Process (CSP) to buy cheaper renewable energy and EDC won out of the three participating bidders.

Green energy is now considered one of the most reliable and affordable energy compared to coal-based power because of the high price of coal in the world market which increased generation rates that are passed through to consumers.

‘WE WANT THE SAME THING’

It can be noted that from P9.14 per kWh in August 2022, MORE Power’s rate for its September billing topped P12.48 per kWh.

Castro said that MORE Power also wants to supply affordable and quality service to its consumers, but the increase in power rate was “inevitable” due to high coal prices in the global market and the weakening of the peso against the dollar.

Castro explained that around 58 percent of the procured electricity from the distribution utilities in the Visayas, and even in the entire country, are sourced from coal-fired power plants, and as the price of coal increased, the power rate also increased.

Data also revealed that the price of coal was at an average 60 US dollars per metric ton from 2018 to 2020, but it started to surge up to 404 US dollars per metric ton in 2021.

Aside from the increase in coal prices, MORE Power also explained that the increase in electricity rate is due to the expiration of its emergency power supply agreement with the Power Sector Assets and Liabilities Management Corporation (PSALM), which provided cheaper power from the Unified Leyte Geothermal Power Plant, in July 2022.

“There was a 75 megawatts available power in PSALM that was priced at P3.60 that nobody was using, nobody was contracting, and it has been there for over a year, and nobody was touching this available power from PSALM. So, when we saw this, without blinking, we immediately contracted because we knew it is going to be beneficial to the consumers, but we were very clear that it was only going to be good for one year as that was the only contract available,” Castro said.

With the expiration of the PSALM contract, MORE Power shifted its baseload supply to coal sources, just in time when world market prices were soaring.

When asked why they let the contract expire, Castro clarified that they “were very clear that it was only going to be good for one year as that was the only contract available” and they needed to switch to a coal power supplier as their contract could not be extended since PSALM’s cooperation period to administer the Unified Leyte Geothermal Power Plant also ended in July 2022.

MORE Power also emphasized that they do not earn from generation charges as these are merely pass-through charges, meaning it only collects from the consumers on behalf of the suppliers.

It is also the ERC that fixes the generation and distribution rates of power distributors and electric cooperatives.

“In spite of the fact that generation has gone up or down, the returns or what the ERC is allowing MORE to charge is fixed, regardless of what the total electricity bill is. Generation charge is also complete pass through as kung ano ‘yung na-charge ng generation plant to us is what we charge to customers, we don’t make any returns from generations,” Castro said.

When asked about the systems loss, Castro explained that systems loss of not more than 6.75 percent is being charged to the consumers as it is regulated by the ERC.

“If your systems loss is higher than the cut that they have given, that is against our income statement, that is not being passed on to customers, what is just being passed on to customers is the regulated cut that the ERC approved. If the systems loss is higher than the cut, we absorb it in our income statement,” Castro added.

Councilor Sedfrey Cabaluna also raised the issue of how MORE can ensure consumers the stability of electricity rate, but Castro said that “there is no such thing as stable price for the long term, as there is no fixed price.”

MORE also said that electricity could go back to pre-pandemic levels “if the NewCastle Coal Index goes back to around $60 per metric ton” and if the exchange rate goes back to around P54 per dollar.

Duron also noted that despite the rate hike, MORE Power still remains to have one of the lowest power rates in the Visayas, based on the latest published rates of private distribution utilities and electric cooperatives in the Visayas.