Malampaya gas restriction hiked Meralco rates by P0.69/kWh

Published October 3, 2021, 10:00 PM

by Myrna M. Velasco

The recurring gas restriction dilemma of the Malampaya field significantly accounted for the higher electric bills paid for by the customers of Manila Electric Co. (Meralco) this year.

Meralco said that of the aggregate P1.04 per kilowatt hour (kWh) rate hikes implemented in series this year, about P0.69 per kWh or roughly 66-percent could be attributed to the constrained output of the country’s commercial gas field and the necessitated shift of the gas plants to liquid fuels.

In an official correspondence to the Senate Committee on Energy, Jose Ronald V. Valles, Meralco first vice president and head of regulatory management office said “of the P1.04 per kWh increase, P0.69 per kWh is due to re-pricing of Malampaya natural gas to reflect the movement of international crude oil prices.”

He further explained that of the Malampaya-incurred rate hikes, about P0.36 per kWh of tariff escalation had been due “to the use of more expensive liquid fuel during Malampaya gas supply restriction.”

On top of that, Valles conveyed that P0.20 per kWh increase could be pinned on the depreciation of the Philippine peso against the US dollar — that in turn impacted on the billings of the First Gas plants to Meralco, because the contracts are dollar-denominated.

The Meralco executive primarily cited that “the costs incurred as to the use of alternative fuel are passed on to the consumers via the generation charge,” and that is the cost component that has a significant pie in the overall pass-on charges to ratepayers.

“The use of alternative fuel averts the detrimental effect of the plants’ non-operation, specifically the impact of the 1,500MW of generation capacity that will be lost in the Luzon grid,” Valles said.

Meralco is sourcing supply from all of the country’s gas plants – namely, the 1,000-megawatt Santa Rita; 500MW San Lorenzo; 414MW San Gabriel; and the 1,200MW Ilijan facility.

When the gas restrictions pervaded though, the San Gabriel plant had not been able to switch to liquid fuel – hence, a force majeure condition — had been invoked by plant owner and operator First Gen Corporation.

Nevertheless, Meralco said when force majeure was declared for the San Gabriel generating facility, it also needed to source replacement power from the Wholesale Electricity Spot Market, of which settlement prices were also hitting peaks during the summer months.

The limited output of the Malampaya field manifested mostly within March to June this year – or generally within the summer months when electricity demand substantially gathered pace; and it just eased up in July and the succeeding months due to colder temperatures and the resulting decline in energy consumption with the government’s move to enforce stricter Covid-19 quarantine measures in August to September.

 
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