SELF-

GENERATION
IN
MERALCO

Customer Relations
Management Office

Ronald R. Torres
Account Officer
November 24, 2005
 MENU FOR TODAY

Demography of MERALCO

Self- Generation Profile

Economics of Self-Generation

Customer Recovery Strategies

Framework in winning back self gen cust

MERALCO FRANCHISE

THE MERALCO
DEMOGRAPHY
• With a total of an estimated
13,000 circuit kilometers and
118 substations, Meralco
distributes electricity throughout
the GMA and adjacent provinces
covering 9,337 sq.km. that is
approximately 3% of total land
area of the Philippines.

• Accounts for 59% of all

electricity sales in the Phils.

• Contributes 50% of the

country’s GDP.
MERALCO FRANCHISE

THE MERALCO
DEMOGRAPHY
• The franchise encompasses
23 cities and 88 municipalities
covering the entire provinces of
• Bulacan
• Cavite
• Rizal
and parts of the provinces of
• Pampanga
• Batangas
• Laguna
• Quezon

• Electrification level is at an
estimate of 97%
of households.
MERALCO FRANCHISE

THE MERALCO
DEMOGRAPHY
• On June 9, 2003,
Pres. Gloria Macapagal-Aroyo
signed into law RA 9209
consolidating all existing
franchises and integrated
the same in a single
franchise valid for 25 years.
MERALCO FRANCHISE

THE MERALCO
DEMOGRAPHY
• Has 30 branches,
23 extension offices,
3 sales offices,
and 10 sectors strategically
located throughout
the franchise area that are
dedicated and fulfilled to
provide the best service
possible.
 Market Size
Market Size
MERALCO ENERGY SALES (Million kWhrs)

CUSTOMER 2004
COUNT
CLASS (M kWhrs)
Residential 3,823,325 8,741.60
Commercial 370,716 8,776.50
Industrial 10,760 7,003.70
Streetlights 4,429 138.50
TOTAL 4,209,230 24,660.30
 Self-Gen
Self-Gen
Profile
Profile
RECOVERED SELF-GEN
COs.
(16) FULL SELF-GEN
CAPABLE – WITH
PARTIAL SELF-GEN MERALCO SERVICE
CAPABLE 13%
(40)
(25) 14% 42%

31%

FULL SELF-GEN
CAPABLE – NO
MERALCO SERVICE
(13)

TOTAL SELF-GEN CAPACITY = 730MW

 Self-Gen
Self-Gen
Profile
Profile
RECOVERED 81 CUSTOMERS AND
PREVENTED THE SAME FROM
VENTURING INTO SELF-GENERATION
RECOVERED SELF-GEN
COs.
(16) FULL SELF-GEN
CAPABLE – WITH
PARTIAL SELF-GEN APPROXIMATELY MERALCO SERVICE
CAPABLE 13%
2,315 Mkwh (40)
(25) 14% UNREALIZED 42%
SALES
(2004)
31%

FULL SELF-GEN
CAPABLE – NO
MERALCO SERVICE
(13)

TOTAL SELF-GEN CAPACITY = 730MW

 Reasonsfor
Reasons for
Self-Generation
Self-Generation
POWER QUALITY
COST
(25)
(31)
0%
20%
36%

44%

COST / PQ
(38)
TOTAL UNREALIZED SALES = 2,315 Mkwh
3.6M barrels of oil or
approx 9.2days total country’s requirement
Why are we averting
self-generation ??
Self-Generation

• Fuel Conservation
• Promote energy independency
• Optimize dispatch of NPC / IPP plants
• Reduction on your Electric Bill
1. Corresponding reduction on generation charge
2. Reduction in the System Loss Charge
• Savings on dollar reserves
• Impact on environment / Clean-Air Act
• Optimize customer investment
AAcall
callfor
forfuel
fuel and
and energy
energy
conservation
conservation

Administrative Order No. 126 was issued by

PGMA on Aug 13, 2005 directing the enhanced
implementation of the Government’s energy and
fuel conservation program.

Private sector urged to adopt similar measures.

DOE is working with private sector to speed up

initiatives to promote fuel conservation.
Economics
Economics
of
ofSelf
Self-Generation
-Generation

Fixed Cost of Self-Generation

• Power plant: all in > US$750 per kW
– Gen-set: US$650 per kW (medium-speed, bunker-
fired, reciprocating engine)
– Installation: > P20 million (foundation
preparation, civil works, power house, etc.)
– Fuel tank: typically free from suppliers
• Labor: 7 personnel
– One plant engineer/supervisor
– Two technicians per shift (three shifts)
Economics
Economics
of
ofSelf
Self-Generation
-Generation

Variable Cost of Self-Generation

• Fuel (as of Sept 2005)
– Bunker: P19.98 per liter
– Diesel: P30.0 per liter
• Operation & Maintenance, Lubrication
– Minor overhaul: every 8,000 operating hours
– Major overhaul: every 20,000 operating hours
– Oil change: every 250 hours
 Diesel/ BunkerOil
oil
www.meralco.com.ph

Diesel/Bunker
pricemovement
price movement

P 3 5.0 0
Industry Conversion rate : 0.25 lit = 1 kwh
P 3 0 .0 0 Variable Cost (diesel) = Php 7.50 / kwh
P 2 5.0 0 Variable Cost (bunker) = Php 4.99/ kwh

P 2 0 .0 0
P 15.0 0
Diesel
P 10 .0 0
P 5.0 0 Bunker

P 0 .0 0
Jan- Feb- Mar - Apr - May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar - Apr - May- Jun- Jul- Aug- Sep-
04 04 04 04 04 04 04 04 04 04 04 04 05 05 05 05 05 05 05 05 05

Source: DOE
Economics
Economics
of
ofSelf
Self-Generation
-Generation

Hidden Cost of Self-Generation

• Capital
– Straight-line Depreciation vs. Capital Recovery
• Land
– Alternate use of land or space
• Risks
– Fuel supply
– Fuel price
– Environmental regulations
Economics
Economics
of
ofSelf
Self-Generation
-Generation

Hidden Cost of Self-Generation

• Permits, Licenses, and COC’s
– Dept. of Environment and Natural Resources
– Laguna Lake Development Authority / ERC
– Local Government Units
• Standby Options
– No provision for standby
– Extra gen-set
– Meralco Standby Service
Economics
Economics
of
ofSelf
Self-Generation
-Generation
The Standby Service Charge
• Standby Rate
– P115 per kW, for primary-metered services
– P120 per kW, for secondary-metered services

• Contracted Standby Capacity specified by

customer
Economics
Economics
of
ofSelf
Self-Generation
-Generation
Self-Gen Cost vs. Meralco Industrial Rate
(Cost of Capital=10%, Meralco standby, Interclass Subsidy Removed)

9.0
8.5 Meralco, Very Large Industrial
8.0 Meralco, No ICX-subsidy
Cost of Self-Generation
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90%
Customer Recovery
Customer Recovery
Strategies
Strategies

Electric
Price
Service

Win Back
Self-Gen
Companies

Customer Market
Relations Intelligence
Customer Recovery
Customer Recovery
Strategies
Strategies

Electric
Price
Service
Improve Power Sourcing Mix
Continue and step up promotion of ODPS
Win Back
Implement Flexible Pricing schemes (TOU)
Self-Gen
Implement
Companiesstandby service charge
Reduce System Loss
Customer Removal of all cross subsidies
Market
Relations Lobby for application Intelligence
of Universal charge
Clean-air Act
Customer Recovery
Customer Recovery
Strategies
Strategies

Electric
Price
Service
Set higher Power Quality (PQ)
standards Win Back
Encourage customer to Self-Gen
separate their
Companies
critical from the non-critical loads
Study and offer embedded generation
Customer Market
Relations Intelligence
Customer Recovery
Customer Recovery
Strategies
Strategies

Electric
Price
Improve customer relationsService
Provide value-added services
Win
Improve Back
operational efficiency
Self-Gen
and delivery
Companies
Go into partnering with core
customers
Customer Market
Relations Intelligence
Customer Recovery
Customer Recovery
Strategies
Strategies
Identify and monitor self-generating
companies/entities.
Electric
Price offering self-generation
Identify companies
Service
to be able to develop counter-strategies or
offerings.
Win Backwith
Build and nurture working relationship
government agencies to support Self-Gen
Meralco’s
initiatives against self-generation.
Companies
Monitor cost of fuels and strategies employed
by big oil companies in pushing their
Customer Market
products to self-generating
Relationsin order to develop
customers/entities Intelligence
counter-strategies
Framework
Framework inin Winning
Winning back
back
Self-gen
Self-gen customers
customers

Input Process Output

 Customer Profile/Data
 Industry Background/ 1) Analysis of Inputs:
business environment Understanding Who Attractive
 Company background the Customer Is Supply
 Historical monthly Contract/
consumption/ demand Arrangement
 Customer
requirement/concerns 2) Where Do We Want
 Load profile To Go:
 Equipment/genset data
Understanding
 Cost to self-gen
 Cost of power (paid to
What the Customer
Meralco) vs. other options Needs/Wants
 Existing arrangements with
customer Incremental
 Customer’s Sales/
process/operations
3) Where Are We Now: Income
 Company’s future plans
 Load growth
Analyzing Current
 Available pricing schemes (regular Performance
rates, ODPS, IS Rider, SPEED, etc.)
 Meralco’s existing customer
service/ sales policies
4) How Do We Get
 Regulatory framework
 Meralco’s power supply sourcing
There: Bridging
mix (existing and future); cost of the Gap
purchased power (long-term)
Framework in
Framework in Winning
Winning back
back
Self-gen customers
Self-gen customers

1) Analysis of Inputs: 2) Where Do We Want To

Understanding Go: Understanding
Who the Customer What the Customer
Is Needs/Wants

3) Where Are We Now: 4) How Do We Get

Analyzing Current There: Bridging the
Performance Gap
Framework
FrameworkininWinning
Winningback
back
Self-gen
Self-gencustomers
customers

Pricing PQ
Scheme Solutions

Customer
Interaction

Customer Cost-Benefit
Service/ Analysis
Com’l Policies
 Energy Consumption
Energy Consumption
of X
of X Cement
Cement (in
Co.kwhs)
(in kwhs) On March 17, 2003, X Cement was
granted an increase in ODPS
availment from 18MW to 20.4MW
14,000,000 and max daily energy availment
GEN-SET MERALCO from 432MWH to 489.60MWH.
CONSUMPTION CONSUMPTION
12,000,000

10,000,000

8,000,000 In December 2002, Meralco

replaced most of the ceramic pin
post insulators with the polymer
6,000,000 type, reduced
Increased circuit
ODPS rate dueexposure,
to the
intensified maintenance activities
operation of NPC’s marginalized
4,000,000 plants, to improve
effected the PQon
increase levels.
NPC
rate

2,000,000
Energy sales from the grid was
realized in Dec. 2002.

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The ODPS was signed by X
Cement on Jul 30, 2001 with
max demand of 18MW and
max daily energy availment of
432MWH.
THANK YOU!