Malampaya shutdown to hike power cost–D.O.E.

By Lenie Lectura – December 22, 2016

from Business Mirror

The 20-day shutdown of the Malampaya gas facility next year will result in an increase of about P1 per kilowatt hour (kWh) in power generation cost, according to the Department of Energy (DOE).

According to Energy Secretary Alfonso G. Cusi, Manila Electric Co. (Meralco) submitted a price simulation, which shows a projected increase in generation charge of around P1/kWh.

Generation cost is a major component of an electricity bill. The price hike will be reflected in the March 2017 bills of customers. “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 natural-gas plants fueled by Malampaya provide around 40 percent of Meralco’s supply requirements. The rest are sourced from bilateral contracts with generation companies and the Wholesale Electricity Spot Market (WESM). During the shutdown, Meralco would have to source power from other sources, such as power supply agreements (PSAs) and source from WESM.

The gas plants would still run, albeit on liquid fuel, which is more expensive than gas. In the past, instances of shifting to liquid fuel have always been higher than the cost of Malampaya gas.

Cusi said Meralco’s price-simulation factors in possible adjustment in WESM prices and the generation cost of natural gas plants due to change in liquid fuel. The DOE chief, however, assured electricity consumers that the shutdown of the Malampaya gas facility “should pose no substantial impact to supply of electricity”. During the shutdown, which is scheduled from January 28 to February 16, there would be a projected electric-supply deficit of about 700 megawatts (MW). “My directive was clear—the Malampaya maintenance activities should pose no substantial impact to supply of electricity by using all available resources and remedies, because power is a basic necessity for our countrymen,” he said.

He added that plans and alternative modes should be in place and ready before the actual shutdown. “We have to ensure that the program works for Malampaya is within the prescribed schedule given to the DOE. Historically, SPEx [Shell Philippines Exploration Corp.] completed its maintenance period on time. It is expected that it will do the same this time,” Cusi said.

He said preparatory activities among industry stakeholders have started. These activities are meant to protect consumers from the adverse impact of the shutdown on the supply and price of electricity.

In a meeting with industry participants on December 15, the DOE was apprised by SPEx of the preparatory works for the Malampaya services maintenance shutdown (SMS).

According to SPEx, the maintenance activities will cover the repair of the subsea facilities, upgrades on the platform and maintenance on the onshore plant. On the power situation outlook, the National Grid Corp. of the Philippines (NGCP) was tasked to simulate the possible power-supply scenarios, while the Philippine Electricity Market Corp. (PEMC) will conduct a simulation on the WESM prices during the Malampaya SMS. “The simulations will be submitted to the DOE for review and evaluation, so that we will be able to accurately respond to any unwarranted power market behavior,” Cusi said.