No Malampaya gas commitment on planned ‘fuel swap’ – Meralco

By Myrna M. Velasco – March 5, 2023, 8:34 PM
from Manila Bulletin

Power utility giant Manila Electric Company (Meralco) said the proposed “fuel swap” arrangement’ aimed at bringing back the 1,200-megawatt Ilijan generating facility to operation cannot be concluded because there was no definitive gas supply commitment from Prime Energy, the new operator of the depleting Malampaya gas field.

Meralco First Vice President and Head of Regulatory Affairs Jose Ronald Valles explained that even before February with the direction of the DOE (Department of Energy), they already discussed the fuel swapping arrangement with the different players – with First Gas, Prime Energy and San Miguel, “We were hoping that we will be able to come up with an agreement that will address the insufficiency in our requirements brought about by that 670MW injunction (by the Court of Appeals),” said Valles.

Unfortunately, Valles said they failed to close the deal until now. “So right now, we’re looking for alternative solution.” The CA injunction effectively stopped the supply of Ilijan capacity to Meralco based on their original fixed-price contract.

The option resorted to by Meralco in shoring up its supply this year is its procurement of additional 180MW baseload and 300MW peaking capacities that are now under competitive selection process (CSPs), the auction system on the award of power supply agreements.

In December, Meralco announced that talks had been initiated with Lopez-led First Gen Corporation for it to share portion of its Malampaya banked gas to the Ilijan plant, which is  owned by South Premiere Corporation (SPPC) of the San Miguel group.

The tricky part of the discussions then were on the volume of gas that the Malampaya field operator can commit for that “fuel swapping” deal, as well as the cost impact on consumers if First Gen will have to resort to importation of more liquid fuel so it can share its banked gas to the Ilijan facility.

Meralco qualified that until those two items are concretely resolved with the relevant parties, a decision cannot be firmed up on that propounded fuel swapping pact.

The talks among the industry players had been directly facilitated by ranking DOE officials, as well as the Energy Regulatory Commission (ERC), but that still ended up in a deadlock.

In a meeting last December, a power supply outlook presented by the energy department showed that if Prime Energy could commit gas supply that will enable the Ilijan plant to run at 420MW,  the incidents of yellow alerts could be pared to 11. Without Ilijan, that could worsen to 27 iinstances of yellow alerts.

Within the context of electricity system operations, a “yellow alert” exhibits insufficiency of power reserves, meaning if power generating facilities will suddenly conk out, available supply could be seriously strained leading to rotational blackouts or service interruptions.

The DOE specified that its projections had been based on the approved Grid Operating and Maintenance Program (GOMP) for the year, factoring in the scheduled maintenance shutdowns of power plants, including the hydropower facilities which are cyclically derated during summer months.

With the wobbly power supply situation in the Luzon grid, primarily within March to July of scorching weather conditions, the return-to-operation of the Ilijan plant is critically depended upon to reinforce supply within this period.