Power supply fluctuation not worrisome but infrastructure bottlenecks are — Global Source

January 14, 2014 11:13 pm 

By Joann Santiago

MANILA, Jan 14 (PNA) — The power rate hike last December resulted to the big jump of domestic inflation rate but a market research firm believes that its over-all impact on the rate of price increases is not “worrisome.”

Inflation posted its two-year high of 4.1 percent last December from 3.3 percent in the previous month on account of the impact on prices of Typhoon "Yolanda" (international name: Haiyan), among others, and the increase in power rate.

Market research firm Global Source believes that fluctuation in power supply in the Philippines will definitely impact on inflation, but noted that “the over-all impact may not be too worrisome.”

The spike in power rate was particularly due to higher transmission cost after the one-month scheduled maintenance shutdown of Malampaya oil-to-gas power plant in the last two months of the year, which in turn lowered the capacity of power plants where Manila Electric Company sources its supply.

Some power plants also went on extended shutdown that further lowered available capacity.

Because of the shutdown, some power plants used more expensive fuel to run their facilities while Meralco tapped other sources such as the spot market, which has higher rates.

The increase in transmission cost stood at then record-high of P3.44 per kilowatt hour. Including taxes and other charges the increase in transmission cost is P4.15/kWh.

“A fair conclusion then from these accounts is that the power rate spike is an extraordinary one-time event with an extremely low probability of recurrence,” the research note said.

However, it pointed out that the spike in power rate in the last month of 2013 is “symptomatic of the power grid’s thin reserve margins.”

It cited pronouncements from the Energy department saying power supply during this year’s summer months is expected to be below the economy’s requirements, thus, the possibility of power outages in any of the peak hours namely: 11 a,m,, and 2 p.m. and 7 p.m.

The research note said that although fluctuation in power supply is not expected to result to long-term increase in the inflation rate “infrastructure bottlenecks are a constraint to sustaining the economy’s rapid growth.”

It noted a report by Meralco that said power demand growth in the past years is higher than installed capacity.

“Hence, as demonstrated by events leading to the recent price spike, the risk of inadequate power especially during periods of high demand and low capacity from hydro plants (summer months) or supply interruptions (caused by any and all misfortune) seems quite high,” it added. (PNA)

LGI/JS/UTB

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