Mindanao Consumers paying too much for electricity from coal power plants

Sep 17, 2018

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Imprudent contracting of power supply by distribution utilities

 

Consumers in Mindanao who are supplied by coal power plants have been paying too much for their electricity. The reason is that distribution utility companies (electric cooperatives and investor-owned DU’s) have been imprudent in contracting for power supply from coal power plants.

Table 1. Average Rates of Generation Component for Electric Cooperatives in Northern MIndanao, July2018 (MCPC Simulation)

 

For instance, MORESCO2 in Northern Mindanao paid probably the highest rate of around P21.00 per kilowatt-hour (kWh) for their loads in excess of the base load requirements in July 2018. That’s because MORESCO2 used power from the FDC Misamis coal plant to supply their intermediate and peaking loads. (This is termed “above-baseload” power supply in the simulation. Please refer to the Table: Cost of Coal Power Supplied to MORESCO 2 Consumers, July 2018).

“When coal power is used to supply intermediate load (this is the load in excess of the base load supplied to the electric coop; it occurs from 8:00 a.m. to 6:00 p.m.) and peak load (this is the load in excess of the intermediate load; it occurs from 6:00 p.m. to 9 p.m.), the price is two to three time greater than when it is used as baseload power supply, or from P10 to 20/ kWh and not P5.40, which is the rate for baseload power supply from coal,” according to Engr. David A. Tauli, president and spokesperson of the advocacy group Mindanao Coalition of Power Consumers (MCPC).

Table 2. Cost of Coal Power Supplied to MORESCO 2 Consumers, July 2018 (MCPC Simulation)

 

A simulation provided by the MCPC shows that MORESCO2 consumers paid an average rate of P7.30/kWh in July 2018 for power bought by the electric cooperative from all generating plants in their portfolio.

The rate paid by MORESCO2 for power supply from PSALM-NAPOCOR was around P2.00/ kWh, and the average rate paid for power supply from the FDC coal plant was around P7.60/ kWh.

The simulation does not include the minimal (less than 1%) electric energy supplied by the KEGI diesel generating plant, but data from MORESCO2 show that MORESCO2 paid more than P300.00/kWh for energy from the diesel plant. Electricity from diesel has minimal impact on the rate paid by consumers for electricity because the diesel plant contributes only a very small portion of the electricity used by consumers of MORESCO2.

Rendering of the FDC Misamis 405MW coal-fired power plant in Villanueva, Misamis Oriental.

 

Tauli says that most of the electric cooperatives in Northern Mindanao use power from PSALM-NAPOCOR to supply base load, and use power from the FDC coal plant to supply their intermediate and peaking loads as well as the part of the base load not supplied by PSALM-NPC.

“In the case of MORESCO2, however, they seem to have used the correct dispatch procedure of using coal supply for all their base load requirements and using power from PSALM-NPC to supply what is not drawn from the PSALM-NPC plants. Thus, MORESCO2 used a relatively small amount of energy from the coal plant to supply above-baseload requirements. This resulted in the high price paid by MORESCO 2 for using coal to supply intermediate and peak loads, while minimizing the average rate paid for coal power supply,” explained Tauli.

In another simulation provided by MCPC to this paper, the average rate of the generation component for electric cooperatives in Northern Mindanao as of July 2018 was P6.00/kWh, with P2.50/kWh as the assumed rate for power purchased from PSALM-NAPOCOR and P8.25/kWh as the estimated average rate for the power supply purchased from coal plants.

However, when the electricity from the coal plant is used for intermediate and peak loads, the rate soars to P14.50/kWh, almost triple the P5.40/kWh rate approved by the ERC for electricity used for base load.

“Is it illegal to charge customers rates for coal power supply that are above the ERC-approved rates? Not in this case, because the ERC specified that the rate approved for the coal plant is for BASELOAD power supply, meaning that the rate of P5.40 is true only when the DUs draw the power demand (measured in kilowatts) 24 hour daily for the 7 days in the week,” Tauli noted.

“However, the average rates for coal power supply that is higher than the ERC-approved rate indicate that the electric cooperatives were imprudent, to say the least, in contracting for power supply from coal plants for their member-consumers,” Tauli stressed.

FDC Misamis Power Corp. 3×135-megawatt (MW) coal-fired power plant supplies 504MW to the Mindanao grid.

 

Although the MCPC simulations were limited to distribution utility companies in Northern Mindanao, Tauli says that the same situation applies to all DU’s in Mindanao that purchase more than forty percent of their generation requirements from coal plants.

“That is because the rate structure for power supply from coal plants is the same in all the power supply contracts entered into by the DU’s with the coal generating companies,” he explained.

The rate structure for power supply from coal has a high fixed-rate component, which results in the DUs paying around 60% of their power bill for the fixed-rate component and 40% for the variable-rate component.

Tauli will discuss a paper that describes in detail the causes of the high rates of electricity in Northern Mindanao, and what consumers can do to bring down the rates, during the Mindanao Power Situation Forum scheduled on Wednesday, September 19, at the USTP Cagayan de Oro campus,.

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