Napocor to rationalize use of diesel power plants

The National Power Corp. (Napocor) plans to rationalize the use of its diesel-fired power plants to minimize their impact to customers over compliance on the Clean Air Act (CAA).

"We are looking at ways to lessen the impact (of the CAA compliance) to our customers. We may use more hydro power plants," Napocor president Rogelio Murga said.

He said they would ask the oil companies supplying their fuel requirement if they could supply CAA-compliant fuel to the power firm.

"We want to assess how much will be the impact of this on the power rates," Murga said.

He said for the past years, Napocor has already brought down the share of oil-fired power plants in the country’s generation mix.

As of end-December 2002, the share of oil in the mix has declined to 11 percent from 21 percent in 2001.

The drop in the use of oil to generate power is consistent with the Arroyo administration’s thrust to do away with the use of imported fuel and enhance the utilization of indigenous sources of energy including geothermal, hydro, natural gas and other new and renewable energy sources like ocean, wind and biomass.

"We have been using more of our coal-fired and geothermal power plants," he said, adding that the entry of natural gas into the mix also helped the power firm in achieving the goal of reducing the use of expensive oil in generating electricity.

Oil companies have estimated that they are likely to increase their cost by 20 to 40 centavos per liter to comply with the new specification requirement of the CAA for diesel products. By January 2004, oil firms and industrial users of diesel are ordered to lower the sulfur content by 75 percent from 0.2 percent to 0.05 percent.

But oil companies have voluntarily agreed to accelerate the use of lower sulfur diesel in about 600 oil retail stations in Metro Manila starting Nov. 1, two months earlier than the Jan. 1, 2004 original schedule under Republic Act 8749 or the Philippine Clean Air Act of 1999.

Early this year, Napocor admitted that the compliance to the CAA might lead to an increase in power rates.

While the state-owned power utility prepares to adhere to new guidelines that will govern the implementation of the CAA, simulations made by its Tariff Division showed that consumers in Luzon with an average consumption of 100 kwh per month will just add one peso to their monthly electric bills to cover for Napocor’s full compliance to the provisions of the law.

Based on Napocor’s initial estimates, the fuel cost adjustment will increase by a mere P0.0086 per kwh in Luzon, P0.0174 per kwh in Cebu-Negros-Panay, and P0.0126 per kwh in Mindanao.

In Bohol, where bunker fuel accounts for 90 percent of the generation mix, consumers will see a five-centavo increase in the fuel cost adjustment component of their bills. This will translate to roughly an P8 increase in the monthly electric bills of the customers in the grid with a monthly consumption of 100 kwh.

The impact on the CAA will be added to the new generation charge approved by the Energy Regulatory Commission (ERC) where fuel cost adjustment is allowed to be recovered from its customers. – Donnabelle Gatdula