ENERGY officials have given assurances that Luzon is unlikely to experience power interruptions during the preventive maintenance period of the Malampaya gas facility that starts Saturday, October 2, 2021, until Friday, October 22, 2021. The shutdown, however, is likely to create an upward pressure on electricity rates.
“They don’t have any projected yellow or red alert notice in the course of the usual delivery of power during the Malampaya shutdown,” said Department of Energy (DOE) Assistant Secretary Gerardo Equiza Jr. during a hearing conducted by the Senate Energy committee. “In their PSAs [power supply agreements], there is a provision that they have to use liquid fuel. The impact, of course is, it’s more expensive so there might be some impact on electricity prices.”
The costs incurred as to the use of liquid fuel when the Malampaya gas facility could not supply the gas plants—Ilijan (1,200 MW), Santa Rita (1,000 MW), San Lorenzo (500 MW), Avion (97 MW), San Gabriel (420 MW)—are passed on to customers via the generation charge.
These gas power plants have a combined capacity of 3,200 megawatts (MW). As the country’s only natural gas facility, Malampaya’s continued operation is vital since 30 percent of households in the country, or 6.575 million residential customers, depend on it.
‘Not that high’
THE Independent Electricity Market Operator of the Philippines (IEMOP), which was asked by Energy Secretary Alfonso Cusi to simulate the impact on the Malampaya gas facility shutdown, played down the prospect of rate spikes.
IEMOP Chief Operating Officer Robinson Descanzo said WESM (Wholesale Electricity Spot Market) prices in October could hover around P3 to P4 per kilowatt hour (kWh).
WESM prices from September 1 to 21 stood at P3.10 per kWh, lower than the average price of P4.76 per kWh in August. Descanzo said the downward trend in WESM prices could continue, on account of low demand and sufficient supply as most baseload plants are no longer on shutdown.
“We’re not seeing any problem in the supply adequacy,” said Descanzo. On WESM prices, he said, the gas plants’ price offers are normally not that high,” even when they run on alternative fuel.
“Since some natural gas plants will still be operating on liquid fuel in lieu of natural gas during the temporary shutdown, price volatility will be likely dampened. But we’ll still have to see how much they will price their capacity,” he said.
While there is sufficient supply of electricity during this period, consumers need to know the effects of all these on their electricity bills. After all, Santa Rita, San Lorenzo, San Gabriel and Ilijan plants supply almost 60 percent of the requirements of Manila Electric Co. (Meralco), the country’s largest power distribution firm servicing over seven million customers.
Twice the cost
IN its September 17 letter to the committee, Meralco said the cost of using liquid fuel is almost twice that of using Malampaya natural gas. “Thus, increase in liquid fuel consumption due to Malampaya curtailment results in higher generation cost,” which accounts for the bulk of the cost component being passed on by Meralco to consumers.
The gas curtailment that Meralco was referring to happened on some days from March to August this year. During the period, the gas plants provided around 56 percent of Meralco’s monthly total supply to its more than seven million customers.
“The contribution of the use of liquid fuel to the increase in overall generation cost this year is around P0.11 per kWh,” Meralco said.
Among the gas plants, only Santa Rita and San Lorenzo plants, which account for 31 percent of Meralco supply, have the capacity to run on alternative fuel when gas from Malampaya is reduced.
“It should be noted that the use of an alternative averts the detrimental effect of the plants’ non-operation, specifically, the impact of the 1,500 MW of generation capacity that will be lost in the Luzon grid, which will likely lead to significant higher WESM prices and/or rotating power interruptions,” Meralco said.
‘Action plans’
THE DOE has already met with industry stakeholders to discuss action plans for the Malampaya shutdown. It assured the public that there would be no supply interruption.
The Senate Energy committee chairman took note of the DOE officials’ assurance on the availability of power supply and preparations such as alternative measures during the shutdown.
“We’ve been assured that brownouts will not happen during the summer season and that there’s sufficient supply, yet power interruption still took place from May 31 to June 2. I do not wish to call them out on this for the second time in a matter of just four months,” said Senator Sherwin Gatchalian.
What’s expected of DOE?
GATCHALIAN emphasized that the DOE needs to ensure that the Grid Operating and Maintenance Program (GOMP) is followed to avoid a repeat of the unplanned and forced outages. He reiterated the need to ensure backup plans as well. “We expect the DOE to exhaust all means to ensure the continuity of flow of electricity to our homes and even avert hikes in electricity rates,” he said.
The last time the Malampaya gas facility underwent a 20-day maintenance shutdown from January 28 to February 16, 2017, the rate impact reached P1.75 billion. To cushion the impact, the Energy Regulatory Commission ordered Meralco to collect from consumers in three monthly installments a total one-time pass-on of P0.66 per kWh.
It is noteworthy to mention that the power supply disruptions in the past few months have been partial, while the events in 2017 that coincided with the Malampaya preventive maintenance involved complete power plant shutdowns.
The Malampaya shutdown this year coincides with increasing fuel prices and a depreciating Philippine peso, both of which are major factors affecting electricity prices.
If there will be no unscheduled power plant outage this month, then the DOE officials might not catch the ire of the lawmakers again.
Image courtesy of Gunawan Gunawan | Dreamstime.com
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