The Market Monitor Minding the Nation's Business
A shutdown for almost three weeks of the Malampaya natural-gas facility off Palawan next month will result in higher electricity prices on top of a likely power shortage in February, simulations at the Department of Energy (DOE) showed.
The DOE tests showed that the maintenance shutdown of Malampaya would result in a P1.20-per-kilowatthour increase in electricity bills, or P240 for an average household using 200 kilowatthour of electricity monthly.
Power distributor Manila Electric Co. (Meralco) submitted a price simulation factoring the Wholesale Electricity Spot Market (WESM) prices due to plant outages during the Malampaya system maintenance.
It factored in the generation cost of natural-gas plants that will shift to liquid fuel (diesel and condensate), which is more expensive than natural gas during the Malampaya shutdown.
SPEx, which is the main operator of the Malampaya facility, reported that it would repair undersea facilities, upgrade the platform, and maintain the onshore plant during the 20-day shutdown.
Energy Secretary Alfonso Cusi said the DOE has firmed up measures during the course of the Malampaya maintenance repair from 28 January to 16 February to ensure the readiness of all stakeholders and to protect consumers from possible market abuses. Cusi said with the simulations, “we will be able to accurately respond to any unwarranted power market behavior.”
The DOE will closely coordinate with all Malampaya stakeholders including the Malampaya Consortium, the National Grid Corp. of the Philippines (NGCP), Meralco, the Power Sector Assets and Liabilities Management (PSALM) Corp., the Philippine Electricity Market Corp. (PEMC) and power generation companies and other distribution utilities to ensure sufficiency of power supply during the shutdown period, Cusi said.
Cusi also directed the Malampaya Consortium consisting of Shell Philippines Exploration B.V., Chevron Malampaya LLC and the state-owned PNOC Exploration Corp. (PNOC EC) to make an assurance to the government that “materials, equipment and other assets necessary for the maintenance of Malampaya should all be delivered by January 15 and these should be ready for deployment to make sure that the repair activities remain on schedule.”
During the maintenance activities, some power plants are on scheduled maintenance, Cusi added.
Based on the simulation, power supply will drop to 8,747 megawatts (MW) on February 18 against a projected peak demand of 8,610 MW, which means there would be “very thin” power reserves during the shutdown period.
To ensure sufficient power supply, the DOE requires the affected natural-gas power plants to run on alternative or replacement fuel although it is more expensive than natural gas. Natural gas costs around P4 per kilowatt-hour; replacement fuel like diesel costs around P6 to P8 per kWh.
To augment the power supply, the DOE said the Interruptible Load Program (ILP) in which around 900MW are enrolled would be readied.
Meralco’s ILP program taps the power-generating facilities of huge private firms during the period when the demand for electricity is at its peak. The participants of the program are compensated for the use of their facilities through added charges in monthly bills.
The DOE is also planning to activate two power plants during the shutdown to prevent power outages but these plants run on costly bunker fuel.
The 650-megawatt Malaya thermal plant in Rizal will supply 70 percent of its capacity while the 100-MW Avion plant in Batangas will meet the peaking requirements of the grid during the Malampaya shutdown, Energy Undersecretary Felix Fuentebella said.
Managed by the state-run PSALM, the Malaya plant is designated a standby and a must-run unit (MRU) by the DOE to address supply deficiency when operating power plants in the grid bog down or become unavailable. It will operate as an MRU until the DOE finalizes its privatization schedule.
The Malampaya gas field supplies fuel to the Lopez Group’s 1,000-MW Sta. Rita and 500-MW San Lorenzo plants in Batangas and Kepco Philippines’ 1,200-MW Ilijan plant also in Batangas.
Fuentebella said the 414-MW San Gabriel gas plant of First Gen Corp. also would be on maintenance during the Malampaya shutdown.
“There will be an increase, but what we will do is to minimize the increase to soften the burden to our consuming public,” Cusi said.
The DOE also wanted to prevent a repeat of the spike in electricity prices that happened in November 2013.
A 30-day shutdown of the Malampaya plant in November 2013 coincided with the breakdown of other power plants that led WESM prices to shoot up.
The Energy Regulatory Commission (ERC) then launched an investigation into the possible collusion of power suppliers at WESM to artificially push up electricity bills, taking advantage of the short supply of electricity.
The ERC has yet to release the result of its investigation.
The WESM price spike is now the subject of a court case in which the Supreme Court ordered deferred a 45 centavos-per-kilowatt-hour (kWh) increase for the January 2014 billing period that Meralco said was part of the effect of the P4.15 per kilowatthour rate hike being spread to collections over six month. RIZA LOZADA
Attn Sec Alfonso Cusi of DOE, this is refers to the repair to maintenance of malampaya production platform in Western Palawan covering the period from Jan 28 to Feb18/17 for a period of 20 days that cost about Php 1.44/kwhr or equivalent to about Php 1.632 billion, to be shouldered by about 6.0 million power consumers is very unreasonable and it has nothing to do with Meralco clients, its the business of Meralco, Transco and three Gas Power Plants that base in Batangas, Santa Rita, San Lorenzo and Ilijan Gas Power Plant with total output capacity of 2700MW. The 2nd option, this will be also taken from the Malampaya funds and to my believe, it is legal under the Supreme Court decision in November 2013.