Malampaya shutdown to hike generation charge–Meralco

The Manila Electric Co. (Meralco), the country’s largest electricity distribution utility, is anticipating an increase in power generation charge after the Malampaya gas facility shuts down in October.

The company, however, assured it has sufficient power supply to service its customers until the election season next year.

“Yes, we anticipate that there will be an increase in generation charge as always because the 1,500 megawatts (MW) of natural gas will be replaced by liquid fuel. But, as of this time, it’s very difficult to speculate how much exactly the increase will be because we are actually using blended supply mix,” said Meralco First Vice President and Regulatory Management Head Jose Ronald Valles.

The scheduled maintenance at the Malampaya gas facility will start on October 2 and end on October 22, 2021.

Malampaya currently supplies 5 gas plants with a combined capacity of 3.2 gigawatts under term supply deals due to expire in 2024. These are the 1,200MW Ilijan, 1,000MW Sta. Rita, 500MW San Lorenzo, 97MW Avion and the 420MW San Gabriel.

Valles said Sta. Rita and San Lorenzo plants will utilize liquid fuel during the Malampaya gas facility shutdown. This is more expensive than using gas.

The Ilijan plant, however, will continue to supply Meralco even when there is no gas from the Malampaya facility as stipulated in their contract.

“They would have to continue delivery of power even when there’s no fuel, so they are supposed to be 100 percent available. Ilijan will continue to deliver supply under the same contracted rate, so there will have to be no additional increase to the consumers,” said Valles.

He assured that Maralco has sufficient power requirements to service its more than 7 million customers during the Malampaya shutdown. “The Meralco franchise is covered by sufficient contracts and sufficient capacities even during this outage period of Malampaya.”

“With respect to the election period next year, we have contracted the extension of the Masinloc power PSA (power supply agreement), which is 260MW, and that contract actually provides for a one-year period and that will end around June 2022 assuming that it is finally given approval by the Department of Energy and the Energy Regulatory Commission. So that will cover us for the summer months next year.”

Meralco’s average power retail rates in the first half dropped further by 3 percent on account of lower charges in generation, transmission, system loss.

Valles said retail rates declined to P7.92 per kilowatt hour (kWh) from the P8.19/kWh registered in the same period last year.

Lower generation charges—which represented 57 percent of the total retail price— accounted mostly for the drop.

During the period, generation charges slipped by 1.3 percent to P4.5 per kWh due to the decrease in charges from the Wholesale Electricity Spot Market, coupled with lower fuel prices, and the peso appreciation.

Average retail rates went down in contrast to the higher inflation recorded during the first half. Based on data from the Philippine Statistics Authority (PSA), inflation in the first six months settled at 4.4 percent, compared with the 2.5 percent recorded in the same period last year.

Meanwhile, the implementation of transmission over-recoveries refund between January and April coupled with the lower ancillary service charges reduced transmission charges by 7.5 percent to P0.73 per kWh. Transmission charges made up 9 percent of the total retail price.

System losses, which accounted for 3 percent of the retail price, were down by 6.8 percent to P0.28 per kWh due to the implementation of system loss over-recoveries refund between January and April, coupled with lower generation and transmission costs.

Distribution charges inched up by 0.1 percent as residential sales continued to increase due to the imposition of enhanced community quarantine.

Rates were also tempered by Meralco’s continued implementation of the Distribution Rate True-Up refund which began in March.

Subsidies, taxes, and universal charges were lower by 5.8 percent to P0.85 per kWh because of lower effective taxes.

FIT-Allowance, which accounted for 1 percent of the retail rate, increased by 60.5 percent to P0.0983 per kWh from P0.0495 as a result of the implementation of higher FIT-All rate starting January.