Generation charges monitoring ERC’s vow

The Energy Regulatory Commission or ERC will maintain stable generation rates in 2024 by strictly monitoring the charges of generation companies or gencos collected from consumers by distribution utilities or DUs.

ERC said it will release early next year its findings on the initial fuel cost audit conducted on generation firms.

The audit involves an analysis of the approved fuel formula of gencos against  the amount collected from distribution utilities that are passed on to consumers.

Generation charge in the monthly electricity bills represents the cost associated with producing the power supplied to consumers, excluding other charges such as transmission fees, system loss, distribution fees, subsidies and taxes.

Coal prices declined

The generation charge is collected by distribution utilities, or Dus, and remitted to the gencos responsible for providing the electricity and constitutes 60 percent to 65 percent of the monthly charges.

Based on the ERC's analysis of available records, there is a noticeable steep decline in coal prices globally, based on the Newcastle Coal Price Index or NCPO — the most common index for thermal coal prices in the Asia-Pacific region and used by Philippine gencos — from December 2022 until November of this year.

It followed the sharp increases in the 12-month prior period. It also appeared in the data that while most gencos are purchasing coal from Indonesia using the same price level, they would usually use the Newcastle Index, which, in effect, shows a large disparity.

Although generation rates have started to stabilize after reeling from the effects of the Russia-Ukraine war that erupted in February 2022, the sharp descent in coal prices does not appear to reflect an equivalent impact on the trend of generation costs in the country.

Additionally, prices of coal are being monitored closely given the domination of coal-fired power plants in the energy landscape, with more than 80 percent of coal supply being imported.

In 2022, coal dominated 44 percent of installed capacity, followed by oil-based at 13.6 percent, natural gas at 13.2 percent, and renewable energy at 29.2 percent.

Coal also leads in gross power generation, having contributed 59.6 percent to the country's power mix.