MORE Power says bilateral contracts may soften September bills

By Rjay Zuriaga Castor

ILOILO CITY – MORE Electric and Power Corp. (MORE Power) said its bilateral power supply contracts with generation companies could help cushion consumers from the impact of record-high electricity prices in the Wholesale Electricity Spot Market (WESM), which are expected to affect power bills this September.

MORE Power spokesperson Angel Tan said the distribution utility has been maximizing its power supply agreements with generation companies to reduce its exposure to volatile spot-market prices.

“This is the tricky part. MORE Power has had this strategic way ever since. We have our bilateral contracts. These are our contracts with generators, where the price of electricity is relatively stable because we already have an agreement with them,” she told Daily Guardian on Friday, Sept. 11.

Tan said MORE Power’s current supply mix is about 27% from WESM and 73% from bilateral contracts.

Ideally, she said, WESM purchases would account for a larger share because spot-market prices are normally lower, while bilateral contracts would make up a smaller portion.

However, the supply mix has effectively reversed because of the sharp increase in WESM prices.

The Independent Electricity Market Operator of the Philippines (IEMOP) reported that the average WESM price in the Visayas increased to PHP 18.59 per kilowatt-hour in August from PHP 11.29 per kWh in July.

IEMOP attributed the increase to generating-unit outages, tighter supply margins, transmission constraints, and greater reliance on higher-cost generation.

MORE Power has yet to publish its final power purchase mix for August.

Based on its previous filings, however, its WESM exposure has ranged from about 30% to 38%.

From June 26 to July 25, WESM accounted for 30% of MORE Power’s energy purchases.

During the same period, the utility also sourced electricity directly from KEPCO SPC Power Corp., Palm Concepcion Power Corp., Energy Development Corp., and Panay Energy Development Corp.

Its WESM share was about 32.5% from May 26 to June 25, 38% from April 26 to May 25, and 34.1% from March 26 to April 25.

Tan said the significance of the bilateral contracts becomes clearer when WESM prices surge.

“If the base price is already expensive, that is already the cost when you buy the electricity. On top of that, we still have to pay transmission charges and other charges. So if the base price is already high, we can expect electricity prices to increase, especially given the series of yellow and red alerts,” she explained.

She described the situation as a “chain effect,” likening it to buying an expensive product at the market before additional costs are added.

Tan said MORE Power is also studying ways to maximize its bilateral contracts and identify additional sources of electricity that could provide consumers with more competitive rates.

“We are studying the possibilities and opportunities that we can maximize so we can find cheaper electricity for consumers,” she said.

Tan also clarified that MORE Power does not earn additional income from the rotational brownouts affecting its customers.

“MORE Power has no income from these brownouts. In fact, we are also losing because instead of electricity being consumed, that consumption is lost because of these interruptions,” she said.

She said some components of the electricity bill are pass-through charges and are therefore affected by conditions in the generation and transmission sectors.

The distribution charge collected by MORE Power, meanwhile, has remained unchanged for several years.

For context, WESM serves as the country’s electricity trading platform, where electricity is bought and sold based on prevailing market conditions.

Bilateral supply agreements, by contrast, provide distribution utilities with contracted electricity prices that can offer greater price stability.

The supply mix and prevailing WESM prices are among the factors that can influence the generation component of consumers’ electricity bills, while distribution, transmission, taxes, and other charges make up other portions of the bill.

MORE Power holds the legislative franchise to distribute electricity in Iloilo City under Republic Act No. 11212, signed in February 2019, and assumed distribution operations in the city in February 2020.