Despite coal plant Iloilo City still facing most expensive electricity rates!

Growth and development of Iloilo City has been stunted by having one of the most expensive electricity in the whole world. This distinction will continue with the amendment of the power purchase agreement between Panay Electric Co. (PECO) and Metrobank’s Panay Energy Development Corp. (PEDC).

The proposed amendment of their power purchase agreement, now pending with the Energy Regulatory Commission (ERC), will bound consumers to onerous conditions for the next 25 years.

Excessive take-or-pay deal

PECO guarantees to “take or pay” excessive quantity of electricity from PEDC beyond the actual demand of its consumers.

PECO Actual Electricity Demand

• Year 2005  =  340,639,943 kWHr
• Year 2006  =  332,669,697 kWHr
• Year 2007  =  340,812,921 kWHr
• Year 2008  =  334,811,810 kWHr
• Year 2009  =  336,984,757 kWHr

However, in the pending PECO-PEDC Amended Power Purchase Agreement PECO guarantees to buy the following electricity quantity:

Baseload of 65 MW from coal at 75% Load Factor

= (65 MW)(1,000 kW/MW)(24 Hrs)(365 Days)(75%) = 427,050,000 kWhr / Year

Plus, Peaking of 20 MW from diesel (estimated)  = 87,600,000 kWhr / Year

Total guaranteed capacity = 427,050,000 + 87,600,000 = 514,650,000 kWhr / Year

The anticipated developments of Plazuela, Megaworld, Ayala and other developers will increase electricity demand by about 50,000,000 kWhr in the next few years.

With a yearly demand of less than 400 million kWhrs, PECO should not guarantee the purchase of more than 500 million kWhrs from PEDC.

It should be noted also that the Renewable Energy Law mandates distribution utilities to get at least 10% of supply from RE sources while the Electric Power Reform Act of 2001 (EPIRA) directs that at least 10% should come from the Wholesale Electricity Spot Market (WESM).

Excess electricity will be more than 100 million kWhrs that will be paid for by PECO consumers through higher rates.

Unreasonable Capital Recovery Fee

PEDC is charging Php3.474 per kWhr as capital recovery fee (CRF) for the amount of P17.88 billion supposedly spent in constructing the 164 MW coal-fired power plant. The CRF on PECO consumers would be more than Php 1.48 billion a year – enough to pay for the entire power plant in barely 12 years.

PECO consumers will be paying for the entire cost of the coal plant in 12 years despite using only less than 30% of the plant capacity =  48.75MW (75% of 65MW) out of the total 164MW coal power plant capacity.

The Php17.88 billion for the 164MW coal-fired power plant is equivalent to US$2.42 million per MW, which is very unreasonable considering that this is more than the bench mark of US$2.223 per MW for constructing a coal-fired power plant in the US in 2009 (please see: http://www.eia.doe.gov/oiaf/aeo/assumption/pdf/electricity.pdf#page=3).

Cheaper Alternative

The generation cost of PEDC’s coal is estimated at around Php 8 per kWhr (with VAT) while that of geothermal energy is only Php 4.88 per kWhr (no VAT). The EPIRA provides that distribution utilities should give its captured market with the least cost electricity.

If PECO is after the welfare of Iloilo City, there is no reason at all why it should not get most of the baseload demand from geothermal energy.

Our city will never develop its full economic potentials with the tentacles of PECO and PEDC strangling our economy.

Stop PECO and PEDC’s abuse of market monopoly power!

PECO consumers unite for affordable electricity!