Briefer on the Interruptible Load Program (ILP)

This preliminary primer is based on ERC’s proposed rules and regulations for the Interruptible Load Program (ILP). The document was accessed in the ERC website on March 18, 2015. The regulations governing the ILP are still subject to change and hence this paper is subject to further revisions.

Update: On April 6, 2015, the ERC through Resolution No. 5 Series of 2015, adopted and made effective the ILP. As early as April 11, 2014, MERALCO was given permission to implement the ILP for its captive customers. Many of the important provisions and underlying logic of the ILP draft were carried over to the the final version.

What is the ILP?In light of the worsening power crisis due to the combined effects of El Nino and the planned outages of the Malampaya power plants, the government proposed the Interruptible Load Program to prevent widespread blackouts. ILP allows large consumers of power, like malls and factories, to voluntarily disconnect from the grid during times of tight supply.

How does the ILP work?The ILP defines three types of customers who can avail of the program (called a PC or participating customer): Participating Captive Customer of a Distribution Utility, a Participating Contestable Customer of a Retail Supplier, and a Participating Directly Connected Customer of the NGCP.

The Captive Customer includes urban establishments and households, these are customers that rely on a distribution utility (like Meralco) and cannot choose their generation provider. Contestable Customers are factories and businesses with large loads which have the option of choosing their source of power through a Retail Supplier. Retail Suppliers act as the middle men between contestable customers and power plants and compete with one another for market share.

A participating customer will assist the NGCP/DU in reducing grid load by voluntarily de-loading (fully or partially) from the grid. The participating customer will generate its own power through diesel generators. The incremental cost of de-loading will be reimbursed by the NGCP or DU.

The compensation paid to PC is calculated as follows:

where:De-loading compensation: Value of reimbursement paid to PC (in pesos)De-Loading Rate: The cost of generation incurred by the PC minus the customer’s “normal” electricity bill for the same period (in Php/kWh)Compensable Power: It’s the actual de-loaded kWh for the current billing period (in kWh)Maintenance Cost (in Pesos): ERC sets a rate of Php 0.32/kWh times Compensable kWh (P) or Php 23,548.00/month whichever is lower.

where:Generation Cost of Fuel: This is the average price of diesel fuel based on the selling price (as of the end of the previous calendar month) of Petron, Shell, and Caltex branches in the city/municipality of the participating customer.Fuel Consumption Rate: Amount of fuel Pegged at 0.34 liter/kWhPC Average Rate: The Participating Customer’s Average Rate for the current billing period

Which companies are participating in the ILP? In the latest DOE report, 80 companies in the MERALCO area have signed up with a combined capacity of 395.06 MW. Actual de-loading capacity ranged from 45% to 77% of committed capacity.1

Participants Committed De-Loading (MW)

SM Prime Holdings, Inc. 184.62Robinsons Land Corporation 23.15Waltermart Malls 14.30Rustan Supercenters, Inc. 8.66Fort Bonifacio Development Corporation 7.60MEGAWORLD CORPORATION (BPO) 7.50

Participants Committed De-Loading (MW)

Shangri-La Plaza Corporation 7.00Century Properties Group Inc. 5.10FAIRVIEW PRIME COMMERCIAL CORP. (formerly Gisborne Property, Inc)

6.00

Ayala Land, Inc. 5.71XIN TIAN TI DEVELOPMENT CORPORATION (Marco Polo, Ortigas)

5.00

Alphaland Development, Inc. 4.50Philam Propoerties Corporation 4.30Megaworld Corporation 4.00Ortigas & Company 4.00

Table 1: Top 15 ILP Participating Customer ranked by committed load as of March 16, 2015. Source: kuryente.ph

Will my electric bill rise due to the ILP?According to the ERC’s Proposed Rules the cost of the ILP will be spread amongst the other customers of the NGCP and the Distribution Utility. This would surely result in higher bills for ordinary consumers. Some Congressmen have called for funding the ILP using the Malampaya funds instead of passing on the cost to the general public.2

Is the ILP fair to both consumers and businesses?A fuel consumption rate for the cost formula was already pegged at 0.34 liters/kWh. This is questionable on two points: 1.) no explanation was given in the proposal on how such a value was derived 2.) comparison with estimated fuel consumption rates from diesel generator catalogues reveal that the ERC value is higher than average3. How this will affect the compensation paid is beyond the scope of this paper although it’s advisable for the ERC to prove that such value is not detrimental to the public. The same issue plagues the maintenance cost, which the ERC pegged at Php 0.32/kWh De-loaded or Php 23,548.00/month (whichever is lower).

The Generation Cost of Fuel does not specify whether the fuel price is based on retail price or wholesale price. The ILP also assumes that the participating customer will purchase fuel at prevailing market prices from nearby gas stations. However it’s not difficult for a medium to large business establishment to contract bulk fuel orders at below market prices and hence make extra profit from such a set-up. Lastly in light of the continuing free fall of oil prices4, pegging the fuel cost on the last day of the previous month protects the PC from price fluctuations at the expense of the public.

Also, it must be noted that there was no consumer group present during ERC’s public consultation for ILP.5

AGHAM, along with other civil society groups, maintains that the current power crisis was brought about by government mismanagement6 7. Ordinary consumers should not foot the bill for this stop-gap solution. There are alternative ways of financing the program without overburdening ordinary Filipinos. Following the user pays principle, the PC’s can carry the cost, especially since for many of these PC’s, utility expenses are passed on to their customers anyways. Following example of other jurisdictions, DU’s (in this case Meralco) can absorb the cost by offering rate discounts to participants. Load shedding provides immediate relief to the DU’s power

shortage problem and on the medium and long term lowers their costs in purchasing long term power contracts.8

References:

Energy Regulatory Commission, “Rules to Govern the Interruptible Load Program,” October 2014, 18 March 2015 <http://www.erc.gov.ph/Files/Render/media/Proposed%20Rules%20for%20Interruptible%20Load%20Program,%20as%20amended_OCT2014.pdf>

Energy Regulatory Commission, “Resolution No. 05, Series of 2015, A Resolution Adopting the Amended Rules to Govern the Interruptible Load Program (ILP),” 21 April 2015, 8 June 2015 <http://www.erc.gov.ph/Files/Render/issuance/16700>

End Notes:

1”Status of ILP Participation-MERALCO,” 14 April 2015 <http://www.kuryente.org.ph/ilp/monitoring>.

2 Ritchie Horario, “ILP pay mode splits lawmakers,” The Manila Times, 4 March 2015, 14 April 2015 <http://www.manilatimes.net/ilp-pay-mode-splits-lawmakers/167259/> .

3 “Approximate Diesel Fuel Consumption Chart,” Diesel Service and Supply, 14 April 2015 <http://www.dieselserviceandsupply.com/Diesel_Fuel_Consumption.aspx>.

4 Peter Waldman, “Saudi Arabia’s Plan to Extend the Age of Oil,” Bloomberg Business,13 April 2015, 14 April 2015 <http://www.bloomberg.com/news/articles/2015-04-12/saudi-arabia-s-plan-to-extend-the-age-of-oil>.

5 Energy Regulatory Commission, “Resolution No. 05, Series of 2015, A Resolution Adopting the Amended Rules to Govern the Interruptible Load Program (ILP),” April 21 2015, 8 June 2015 <http://www.erc.gov.ph/Files/Render/issuance/16700>

6 POWER, BAYAN, IBON Foundation, AGHAM, “Power Failure: 10 Years of EPIRA,” June 2011.

7 University of the Philippines Center for Integrative and Development Studies, “A Brief Statement on the Philippine Energy Crisis,” 8 June 2015 <https://drive.google.com/file/d/0B720ke2SiJHSZUpzal94aFZKRUE/view?pli=1>

8 Brubaker & Associates, Inc., “Beware of Utilities’ Attempts to Undervalue Interruptible Load,” 14 April 2014 <http://www.consultbai.com/news-a-events/46-beware-of-utilities-attempts-to-undervalue-i>.

APPENDIX 1 - Full list of ILP Participants in the MERALCO franchise areaSource: http://www.kuryente.org.ph/ilp/monitoring

Participants Committed De-Loading (MW)

SM Prime Holdings, Inc. 184.62Robinsons Land Corporation 23.15Waltermart Malls 14.30Rustan Supercenters, Inc. 8.66Fort Bonifacio Development Corporation 7.60MEGAWORLD CORPORATION (BPO) 7.50Shangri-La Plaza Corporation 7.00Century Properties Group Inc. 5.10FAIRVIEW PRIME COMMERCIAL CORP. (formerly Gisborne Property, Inc)

6.00

Ayala Land, Inc. 5.71XIN TIAN TI DEVELOPMENT CORPORATION (Marco Polo, Ortigas)

5.00

Alphaland Development, Inc. 4.50Philam Propoerties Corporation 4.30Megaworld Corporation 4.00Ortigas & Company 4.00NATION REALTY, INC. 3.80THE INTERNATIONAL RICE RESEARCH INC.

3.70

FILINVEST LAND INC. - Festival Supermall 3.60UNIVERSAL ROBINA CORPORATION 3.13Federal Land, Inc. (GT Tower International) 3.10STA. LUCIA MALLS 3.00SUNPOWER PHILS MFG LTD. 3.00POWER CONCESSIONAIRES, INC.2 2.75THE INSULAR LIFE ASSURANCE CO., LTD

2.70

GMA NETWORK INC. 2.50DEARBORN REALTY CORP 2.40ICE LAND CORP 2.40LA SALLIAN EDUCATIONAL INNOVATORS FOUNDATION (DLS-CSB) INC.

2.40

RIVERBANKS DEVELOPMENT CORP. 2.38QUANTUVIS RESOURCES CORPORATION (OAKWOOD HOTEL)

2.20

GLOBE TELECOM, INC. (The Globe Tower - BGC)

2.00

MASTERPIECE ASIA PROPERTIES, INC. (STARMALLS)

2.00

RPJ DEVELOPMENT INCORPORATED 1.83POLYFOAM-RGC INT'L CORP. 1.80

Participants Committed De-Loading (MW)

METRO RETAIL STORES GROUP INC. (Lucena City Value Shoppers)

1.70

HOUSE OF REPRESENTATIVES 1.70SUNSTAR MALL -Laguna 1.65METRO RETAIL STORES GROUP INC.(Valueshop - Metro Fort Bonifacio)

1.60

METRO RETAIL STORES GROUP INC. (Metro Alabang Town Center)

1.60

CHERRY FOODARAMA INC. 1.60ASB HOLDINGS, INC. (ST. FRANCIS SQUARE)

1.50

CAVITE COMMERCIAL TOWNCENTER, INC.

1.50

MANILA EXPOSITION COMPLEX, INC. 1.50ASB HOLDINGS, INC. 1.50THE TAIPAN PLACE CONDOMINIUM ASSOCIATION, INC.

1.50

MAKATI SKY PLAZA INC. 1.40PACIFIC MALL CORPORATION 1.30BA-LEPANTO CONDOMINIUM CORPORATION,

1.30

SERENDRA, INC. 1.24MACRO FUNDERS AND DEVELOPMENT CORPORATION

1.20

STAR MOTOR MFG IND INC 1.10MERCURY DRUG CORPORATION-LIBIS 1.00RAFFLES CONDOMINIUM CORPORATION 1.00

PHIL STOCK EXCH CTR CONDO CORP (PSE Tektite)

1.00

ETON PROPERTIES PHILIPPINES, INC. 1.00ABC DEVELOPMENT CORPORATION (TV 5)

1.00

MAR-NOL REALTY CORP. 1.00DMCI HOMES (CORPORATE OFFICE) 1.00PANORAMA DEVELOPMENT CORP 1.00FIRST PHILIPPINE REALTY CORPORATION

1.00

SUN LIFE OF CANADA (PHILIPPINES), INC.

1.00

BEST RUBBER CORP. 1.00DAIICHI PROPERTIES & DEVT INC. (THE ORIENT SQUARE)

1.00

ONE GLOBAL PLACE CONDOMINIUM ASSOCIATION, INC

2.00

GURU PROPERTY DEVELOPMENT & MANAGEMENT CORPORATION (VICTORY MALLS - COLOOCAN)

1.00

Participants Committed De-Loading (MW)

AMS ASIA INC. 1.00HAMLIN INDUSTRIAL CORPORATION 1.00TANN PHILIPPINES INC 1.00UNITED LABORATORIES INC. (Mandaluyong)

1.00

THE JMT CONDOMINIUM CORPORATION 1.00

MANTA EQUITIES, INC. (NAC Tower) 1.00DE LA SALLE HEALTH SCIENCES INSTITUTE

1.00

FEATURE REALTY HOLDINGS & DEVT (BAY CITY MALL)

1.00

PRINTWELL INC 1.00POSH PROPERTIES DEVELOPMENT CO (ANCHOR LAND HOLDINGS, INC.

0.50

CHMI HOTELS & RESIDENCES, INC (ACACIA HOTEL)

1.00

ASIAN STAR CONDOMINIUM CORP 1.00SEDA HOTEL - BGC 0.50CITYSTATE CENTRE CONDOMINIUM CORP.,

0.50

TOTAL 394.52