DOE admits higher future rate hikes

Published July 5, 2021, 7:00 AM

by Myrna M. Velasco

The Department of Energy (DOE) said the 20-day Malampaya preventive maintenance shutdown scheduled in October this year will spark higher rate hikes toward the close of the year.

Energy Secretary Alfonso G. Cusi stated the higher electric bills to be paid by consumers will be mainly triggered “by the shifting of fuel” of the gas plants – which is quite a menacing scenario given the soaring oil prices in the world market.

When asked if the DOE can assure that the recurrence of rotational blackouts will not happen at the duration of the gas production facility’s downtime, the energy chief failed to give a definitive answer. Cusi  just noted that everything “will depend on the cooperation of NGCP (National Grid Corporation of the Philippines as system operator) and the power plants.”

Energy Secretary Alfonso G. Cusi

On niggling criticisms that the DOE secretary has been spending more time in politics instead of focusing squarely on solving the pressing problems of the energy sector, Cusi defended that his department “is not failing on its task and it has its attention on fixing” the very messy state of the power industry.

When the Malampaya gas field had its last 20-day shutdown in 2017 (from January 28 to February 16), that triggered P0.92 per kilowatt hour (kWh) spike in the electric bills of consumers in Luzon or an aggregate cost burden of P2.4 billion to the ratepayers.

To prevent a rate shock then, the Energy Regulatory Commission (ERC) ordered a three-month staggered pass-on of the rate increases at the scale of P0.30 to P0.32 per kWh every month.

At this stage, alarm bells are raised that the maintenance shutdown of the gas production facility may either cause power interruptions if the simultaneous forced outages of power plants will persist. The more negative impact would be increases in electricity tariffs because the gas plants would have to change fuel usage to either condensate or other liquid fuels.

These are generally more expensive especially at this time when prices of the basket of crudes have been surging past $75 to $76 per barrel.

The power plants utilizing the gas output of the Malampaya field include the 1,000-megawatt Santa Rita, 500MW San Lorenzo; 1,200MW Ilijan; 414MW San Gabriel and 97MW Avion facilities. These plants account for more than 3,200MW of capacity being fed to the Luzon grid.

This year’s maintenance downtime of the gas field will coincide with the concluding timeframe on production ramp-up of manufacturing facilities to satiate higher consumer demand during the Christmas season.

Based on historical data from the Wholesale Electricity Spot Market (WESM), electricity demand typically peaks within the months of September and October because factories will be at escalated ‘churn rate’ in preparation for the yearend holiday demand.

The most notable preventive maintenance shutdown of the Malampaya field happened in 2013 – or the so-called ‘perfect storm’ in the Philippine power industry because of the P4.50 to P5.00 per kWh rate hikes that consumers could have painfully shouldered in their electric bills had the Supreme Court not stopped tariff adjustments at the time.

Given the series of “forbidding events” every time the gas field goes on preventive maintenance, the DOE has been prodded to seriously map out contingency plans for this year’s October shutdown of the Malampaya facility.