Iloilo City residents are currently enjoying some of the lowest electricity rates in Western Visayas, thanks to the strategic efforts of MORE Electric and Power Corp. (MORE Power).
This achievement stands in contrast to the higher rates faced by consumers in areas served by the Iloilo Electric Cooperatives (ILECOs).
In May, MORE Power’s effective residential electricity rate was P11.3263 per kilowatt-hour (kWh), a modest increase compared to other regions. In contrast, rates for other electric cooperatives in the region surged significantly, with some like ILECO III seeing rates rise to P15.3297 per kWh.
The discrepancy between these rates raises important questions about how power is sourced and managed, and what lessons can be learned and used by the ILECOs.
One of the key differences in approach lies in how MORE Power manages its power purchasing. MORE Power has dedicated a team to closely monitor the Wholesale Electricity Spot Market (WESM) for opportunities to secure cheap power dispatches, particularly during periods of low consumption. This proactive monitoring allows them to capitalize on lower rates when the demand is minimal, thereby reducing overall costs.
ILECOs, on the other hand, might benefit from adopting a similar strategy. By dedicating resources to continuously watch the market, these cooperatives could potentially identify and secure lower-cost power, especially during off-peak hours. This adjustment could result in significant savings, which would be reflected in lower rates for consumers.
MORE Power has also minimized its reliance on the volatile spot market by securing bilateral contracts with power generators. According to Niel V. Parcon, Vice President for Corporate Energy Sourcing and Regulatory Affairs at MORE Power, the company secured bilateral contracts for 66 percent of its energy needs, reducing its exposure to the WESM to just 34 percent. This strategy has proven effective in maintaining competitive rates even during periods of increased demand, such as the summer months when electricity consumption typically spikes.
The ILECOs, on the other hand, have experienced substantial rate increases largely due to their greater reliance on the WESM during peak demands and power outages, which MORE Power also experienced. The unpredictable nature of the spot market, compounded by recent increases in demand driven by extreme weather conditions, has led to significant cost burdens for these cooperatives and their consumers.
Interestingly, MORE Power, despite being a profit-oriented entity, has managed to maintain some of the lowest rates in the region. This feat highlights that with efficient management and strategic planning, it is possible to offer competitive rates without compromising on service quality. Electric cooperatives, traditionally not-for-profit entities focused on serving their members, can learn from MORE Power’s approach. By enhancing operational efficiency and adopting market-savvy practices, cooperatives can better serve their members’ interests.
Another area where MORE Power excels is in its transparency and communication with consumers. The company has been forthcoming about the factors affecting electricity rates and the measures it is taking to mitigate increases. This transparency builds trust and helps consumers understand the dynamics of their electricity bills.
ILECOs can enhance their consumer relations by increasing transparency and regularly updating their members about the steps they are taking to manage costs and secure affordable power. Educating consumers about the factors influencing their electricity bills can also foster a more cooperative relationship and reduce dissatisfaction during periods of rate hikes.
The lessons for the ILECOs are clear. By studying MORE Power’s model, the ILECOs could adopt a more proactive stance in their power procurement strategies. Forming dedicated teams to monitor the WESM and securing more bilateral contracts could help stabilize and potentially lower their electricity rates.
Additionally, diversifying their power supply sources and entering competitive selection processes for power supply contracts could provide more flexibility and resilience against market fluctuations.
While the current challenges faced by the ILECOs, such as regulatory delays in contract approvals and the impacts of the El Niño phenomenon, are not to be underestimated, a shift towards a more dynamic and market-responsive approach could yield significant benefits. The example set by MORE Power demonstrates that even profit-oriented entities can offer lower rates through strategic planning and market engagement.
In conclusion, as the ILECOs navigate the complexities of power supply and pricing, looking to MORE Power’s successful strategies could provide a roadmap for more sustainable and cost-effective electricity distribution.
By leveraging market opportunities and securing stable power sources, the ILECOs can better serve their consumers and ensure more predictable and affordable electricity rates.
