ERC Requests Power Firms to Stagger Fee Hikes due to Increased Electricity Charges and Forced Outages

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ERC Requests Staggered Increases in Electricity Charges for May

The Energy Regulatory Commission (ERC) has called on distribution utilities and generation companies to stagger potential increases in electricity charges for the month of May. ERC Chairman and CEO, Monalisa Dimalanta, made this announcement during an online briefing. Dimalanta explained that the rise in charges is a result of the high demand for electricity in April, coupled with forced outages at several power plants. These outages have forced distribution utilities and generation companies to rely on more expensive forms of fuel for electricity production.

Unexpected Challenges in April

Dimalanta acknowledged that the extreme heat in April had already been anticipated to reduce the operation of large hydro plants. However, what was unexpected was the tripping of coal and natural gas plants. As a result, diesel plants had to be utilized to keep the system running, despite their higher operating costs. Dimalanta emphasized that the usage of these diesel plants would inevitably lead to increased electricity rates for May. She appealed to distribution utilities to stagger these increases voluntarily. However, the exact magnitude of the increases remains uncertain, as pricing varies among the 141 distribution utilities across the country.

ERC’s Decision in Line with Market Operations

The ERC’s request to stagger the increases aligns with its decision to temporarily suspend the operations of the Wholesale Electricity Spot Market (WESM) in Luzon and Visayas during red alert periods. These red alerts, which indicate a high demand for electricity and a low supply margin, have been a recurring issue in the Luzon and Visayas grids. The ERC’s data shows that the duration of red alert periods has significantly increased in the first four months of 2024 compared to the same period in 2023.

In the Luzon grid, red alert periods lasted for up to 20 hours and 46 minutes in the first four months of this year, whereas there were no red alerts during the same period in 2023. Similarly, the Visayas grid experienced a substantial rise in red alert durations, reaching 24 hours and 14 minutes compared to only 3 hours and 59 minutes in the first four months of 2023.

Reasons Behind the Suspension of WESM

Dimalanta clarified that the suspension of WESM operations was primarily due to the high heat index experienced during this period. The extreme heat prompted other government agencies to implement measures to assist the public, while some regions declared a state of calamity. The ERC considered two key factors when issuing the suspension order. Firstly, the unprecedented heat index that has been affecting the country since April. Secondly, the Department of Energy’s data, which indicated a significant increase in electricity demand corresponding to the heat index.

Consumer Welfare as a Priority

Dimalanta emphasized the importance of considering consumer welfare when determining electricity rates. She urged distribution firms and generation companies to be mindful of their customers and not fully pass on the higher electricity prices. Dimalanta reminded them of their responsibility to contract electricity in a way that minimizes their exposure to volatile price changes.

In conclusion, the ERC’s request for staggered increases in electricity charges for May aims to alleviate the burden on consumers. The rise in charges is a result of the high demand for electricity in April and the forced outages experienced by power plants. The suspension of WESM operations during red alert periods is a proactive measure to ensure grid stability. The ERC’s decision takes into account the challenges posed by the extreme heat index and aims to prioritize consumer welfare.

Source: The Manila Times

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