The gas production restriction at the Malampaya field has prompted fuel shift of the country’s gas-fired power plants, which may consequently trigger hikes in electricity rates.

As advised to relevant power industry stakeholders, several generating units of the Santa Rita and San Lorenzo power plants in Batangas changed their utilization to liquid fuels as of Friday (August 28).

The generating units that had to run on oil include the modules 10 and 30 of the 1,000-megawatt Santa Rita gas plant; and then module 60 of the 500MW San Lorenzo power facility.

According to First Gen Corporation, the owner and operator of the gas-fired power plants, the limited gas production had been advised by Malampaya field operator Shell Philippines Exploration B.V. (SPEX) to persist through the weekend.

But other industry stakeholders like the Manila Electric Company (Meralco) had not been apprised of specific date yet on when the gas production curtailment will be resolved, hence, the utility firm said it cannot provide assessment yet on its definitive impact on the rates.

In similar circumstances in the past, the fuel shift of the gas plants when there is restriction in Malampaya’s production always precipitated uptick in electricity rates, because liquid fuel comes as a more expensive option versus gas.

Meralco, which is the main off-taker (buyer) of the power capacity generated from the gas plants, indicated that the outcome of the limited gas output will likely be higher rates to be passed on to consumers in the forthcoming billing cycle.

 Oil prices in the world market had been at US$44 to US$45 per barrel as of August 28, which may turn up as the reference for the liquid fuel pricing alternatively fed to the domestic gas plants.

The Malampaya gas production facility supplies the fuel requirements of more than 3,200MW capacity of electric generating plants in the country – including the Santa Rita, San Lorenzo, 1,200MW Ilijan, 414MW San Gabriel and 97MW Avion plants.

The gas plants are being relied upon by the country’s power industry both for the base load and mid-merit capacity needs of the system. Ideally, gas facilities are the most flexible type of generation that can plug capacity gap in the system when intermittency of renewable energy (RE) kicks in.

Meralco itself is sourcing massive fraction of its supply from the gas plants – with Santa Rita and San Lorenzo being among the facilities it contracted under the independent power producer (IPP) regime of power supply agreements (PSAs).

The country’s giant distribution utility also has supply contracts to procure capacity from the San Gabriel plant, which is likewise owned by First Gen; and then the Ilijan plant which is under an IPP administration pact with a subsidiary of SMC Global Power Holdings of the San Miguel Group.