San Miguel Corp. (SMC), the Manila Electric Co. (Meralco), and First Gen Corp. are going to discuss how they can put the Ilijan gas plant back on line so the grid would be injected with 1,200 megawatts (MW) of capacity.
According to Meralco, one way to make this happen is for First Gen to temporarily reallocate its gas supply from the Malampaya gas field to the Ilijan gas plant—which has not been running for five months now following the expiration of the build-operate-transfer (BOT) contract with the government last June.
Consequently, the Ilijan plant’s gas supply and purchase agreement (GSPA) with the Malampaya consortium had expired. This meant that Ilijan, which accounts for about 10 percent to 12 percent of Luzon’s dependable capacity, could no longer draw its fuel supply from the Malampaya gas field.
The offer that is now on the table is for SMC to supply Meralco the full 1,200MW capacity of Ilijan at “a minimal P1 per kilowatt hour [kWh] in capital recovery fee [CRF] or half of its capital cost on the facility.”
“[SMC] relayed that to us last Friday and I said I can’t commit because I have to do the rate simulation, the rate impact, and up to now we are still running the numbers and the impact on the prices to the consumers.
“And then Meralco will be the one to look for the fuel but since this is an Ilijan plant—the source of fuel is only Malampaya—and right now Malampaya gas is fully allocated to First Gen plants. So, we cannot source from elsewhere,” said Meralco First Vice President Jose Ronald Valles.
Aside from the P1 per kWh CRF, Valles said there is a variable cost component amounting to P0.30. “That was included in the offer to us that we received. So that’s about P1.30 in all.”
An offer, meanwhile, will be discussed with First Gen for it to sell its Malampaya gas supply that currently fuels its 1000MW Sta. Rita, 500MW San Lorenzo, 400MW San Gabriel, and 100MW Avion power plants. If and when First Gen agrees, it will have to source liquid fuel—three times expensive than natural gas—to feed these four gas plants.
Valles said First Gen would be consulted on this.
“These mechanics first have to be agreed upon by Meralco, SMC, and First Gen. The moment we come to an agreement, we need to get the approval of the DOE [Department of Energy] approval and ERC [Energy Regulatory Commission] before that can take effect. So, that would probably take time. We’re trying to find a way on how to facilitate completion of everything—the written agreement—within a week. I hope we can do it.”
He said the overall objective of these talks is for the Ilijan plant to resume operations to augment the thinning power supply and reserves. “We will keep the 1200MW of Ilijan running because if we don’t, if the fuel of gas of Malampaya will not be diverted for the use of the Ilijan, then Ilijan will remain [shuttered]. So you lose the 1200 MW.”
Thin reserves
Lately, the Luzon Grid has been frequently placed on yellow and red alert due to thin reserves brought about by the shutdown of a number of power plants.
In fact, the National grid Corporation of the Philippines has once again placed the Luzon grid on yellow alert from 1 p.m. to 4 p.m. and from 5 p.m. to 6 p.m. on Tuesday.
A yellow alert means insufficient operating power reserve. Four power plants—Calaca 2 (300MW), GMEC 1 (316MW), Masinloc 3 (355MW), GNDP 2 (668MW)—conked out while 3 power plants—Masinloc 1 (250MW), Masinloc 2 (285MW), Sual 1 (310MW)—reported below-capacity generation.
In all, 2,145MW was shaved off from the grid on Tuesday.
“As I understand from DOE Secretary Raphael Lotilla, he wants the 1200MW to remain operational. So, the only way to do it is to source fuel for it. Divert the fuel of First Gas, transfer it to Ilijan so it can run on natural gas, and for the First Gas plants to run on liquid fuel. But the liquid fuel has to be a pass-through cost to us. That’s the mechanics,” Valles said.
Lotilla said earlier that his office will prioritize Ilijan to run again. “We lost 1,200MW of Ilijan, which is powered by natural gas, so this is a priority for us…The President has directed that we address the uncertainties over investments in the upstream so that we can mobilize the natural gas around Malampaya and other fields for our needs at the soonest time possible.”
Valles also said that the DOE has approved Meralco’s application to exempt it from competitive auction some of the emergency power supply agreements (EPSA) it forged with some power suppliers.
“We have secured the certificate of exemption from the DOE. It was issued last week. Since the TRO [temporary restraining order] is only for the 670MW, the certificate of exemption is effectively covering only that amount of capacity which is 670MW.”
The Meralco official was referring to the Court of Appeals TRO suspending the implementation of the power supply agreements Meralco forged with SMC Global Power Holdings Corp.
“What we have negotiated with so far is with AboitizPower’s Dinginin plant but they only offered 300MW, and only covering a period of until January 25, 2023. So, that’s less than two months at P5.95 per kWh if I am not mistaken. The EPSA is supposed to be for a year. We are looking for additional 370MW.
SMC has withdrawn all its offers covering Limay and Masinloc plants and replaced these with its Ilijan offers. So, we’re running the numbers right now,” said Valles.
The TRO issuance stemmed from ERC’s September 29 decision denying the joint motions of Meralco and SMC Global Power units for price adjustments to serve as temporary relief covering a combined loss of P5.2 billion incurred by South Premier Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC) from January to May due to the unprecedented spike in fuel prices.
“We’re doing everything possible to mitigate the impact of the TRO, as well as the impact of any increases that will be brought about by the price offers of the different generators from the other EPSAs,” said Valles.