Power-industry stakeholders have set a series of meetings to tackle the necessary preparations amid an impending 20-day shutdown of the Malampaya natural-gas facility scheduled in January next year.
“We are coordinating with all stakeholders affected to ensure sufficiency of supply and maximize protection for the consumers. We have met with SPEX [Shell Philippines Exploration BV], NGCP [National Grid Corp. of the Philippines], Meralco [Manila Electric Co.], PEMC [Philippine Electricity Market Corp]. on December 15 and will meet again including the affected gencos [generation companies] on December 22,” Department of Energy (DOE) Undersecretary Felix William Fuentebella said in a text message.
SPEX, operator of the Malampaya deep water gas-to-power project, said the shutdown is necessary to keep the gas facility in good shape.
Fuentebella said Energy Secretary Alfonso G. Cusi has asked stakeholders to submit on December 23 their plans on how to address the situation in order to avoid the possibility of a repeat of the November 2013 Malampaya 30-day shutdown incident that led to the controversial high Wholesale Electricity Spot Market (WESM) prices.
Three years after the record-high increase in Meralco’s charges was announced, regulators have yet to release the result of its investigation into the possible collusion or abuse of power allegedly committed by industry players that resulted in an exorbitant rate hike yet in history.
These rates include the P0.45 per kilowatt-hour (kWh) deferred increase for January 2014 billing period that Meralco intends to collect over a six-month period. An earlier P4.15 per kWh rate hike was also set to have been implemented in phases starting in December 2013, but was stopped by the Supreme Court.
According to Meralco head for utility economics Lawrence Fernandez, the 2017 Malampaya shutdown is scheduled on January 28 to February 16.
He said demand for power in the Luzon Grid is typically low at this time of the year, because the weather is cool. “For the Meralco area, the months of low demand has historically been January, February and March,” Fernandez said.
The shutdown period will be reflected in the March 2017 billing to customers.
The natural-gas plants fueled by Malampaya provide around 40 percent of Meralco’s supply requirements, the official said, adding that the rest are sourced from bilateral contracts with generation companies and the WESM.
During the shutdown, Fernandez said Meralco would have to rely for power from other sources. “We will optimize other PSAs [power- supply agreements] and source from WESM.”
Joe Zaldarriaga, Meralco spokesman, said there would be a projected electricity supply deficit of about 700 megawatts (MW) during the shutdown. “In the past, instances of shifting to liquid fuel has always been higher than the cost of Malampaya gas,” he said.
The Luzon grid is dependent on Malampaya, which fuels three power plants: Santa Rita, 1,000 MW; San Lorenzo, 500 MW; and Ilijan, 1,200 MW. The Santa Rita and San Lorenzo power plants are owned by Lopez-led First Gen Corp., while Ilijan is owned by Kepco Philippines.
These plants will use more expensive alternative fuel throughout the shutdown period.
Fernandez said the Santa Rita and San Lorenzo gas plants will continue to run, but on liquid fuel.
Ilijan plan, meanwhile, will be available, but its output will be limited up to 420 MW only. Fernandez said one block (600 MW) of Ilijan will go on scheduled maintenance while the other block will continue to run on biodiesel but only up to 420 MW.
PEMC President Melinda Ocampo said the Malampaya shutdown would not lead to a repeat of the 2013 incident because existing mitigating measures are put in place to prevent abnormal price spikes.
“There is a threshold that will prevent higher WESM prices,” she said.
PEMC is the operator of WESM, the country’s electricity trading floor.
Malampaya’s last maintenance shutdown in November 2013 significantly pushed up power rates and this led to reforms in the WESM.
WESM’s primary offer cap was originally set at P62 per kWh but regulators lowered it to P32 per kWh starting December 2013 in a bid to prevent excessive price spikes.
Besides the primary cap, the ERC also ordered the implementation of a secondary cap to further protect consumers from excessive price spikes triggered by supply tightening.
Called the price threshold mechanism, the P6.245 per kWh secondary cap kicks in the market once an average threshold of P9 per kWh is reached over a 168-hour period.
The thresholds were computed based on historical prices, with allowance for three intervals hitting high market-clearing prices.
Fernandez also said that with these measures, the utility firm’s rates may not reach the record-high levels. “We don’t expect price spikes like in November and December 2013 supply months because of the lower primary cap in the WESM and the secondary cap,” he explained.
Besides this, he cited Meralco’s Interruptible Load Program (ILP) meant to prevent power outage incidents.
ILP works by calling on business customers with loads of at least one MW to run their own generator sets, if needed, instead of drawing power from the grid.
With the ILP, power supply from the grid that will not be consumed by participating customers will be available for use by other customers within the franchise area. Through this, the aggregate demand for power from the system will be reduced to a more manageable level, helping ensure the availability of supply.
Meralco was earlier expecting to sign up more ILP participants that would aid the utility firm in addressing sudden power outage in its franchise area.
Meralco’s ILP had helped avoid power outages in some incidents of yellow and red alerts.
A yellow alert is issued by NGCP when contingency reserve is less than the capacity of the largest synchronized unit of the grid. In Luzon this is equivalent to 647 MW, or one unit of the Sual power plant.
A red alert, meanwhile, means that there is severe power deficiency.
The Malampaya facility’s previous scheduled maintenance was held in March 2015.
SPEX, the upstream company of Pilipinas Shell, completed a 30-day scheduled shutdown meant to install a $765-million platform in a bid to maintain fuel supply to power plants providing about half of Luzon’s electricity needs.