Meralco to seek fuel allocation for SMC’s Ilijan plant offer

Published December 6, 2022, 12:03 PM

by Myrna M. Velasco

The ball has been tossed into the court of power utility giant Manila Electric Company (Meralco) to secure gas fuel allocation for the offer of San Miguel Corporation to have its 1,200-megawatt Ilijan gas-fired power facility utilized to augment power supply, primarily for the Luzon grid.

According to Atty Jose Ronald V. Valles, Meralco first vice president and head of regulatory affairs, the utility firm will discuss with Lopez-led First Gen Corporation if they could share a fraction of the gas supply that they have been sourcing from the Malampaya field for their gas-fired power plants in Batangas.

Over the weekend, SMC Global Power Holdings Corp (SMCGP) of the San Miguel group announced that it is offering the utilization of its Ilijan plant for a capital recovery fee (CRF) of P1.00 per kilowatt hour (kWh) plus a variable operation and maintenance (O&M) fee of P0.30 per kWh.

Valles, nevertheless, indicated that the San Miguel offer does not include fuel cost component yet, which will be the expensive part – and fuel procurement is a function that has been shifted to Meralco in the proposed deal.

“The offer of SMC is only for fixed cost, that’s the CRF of P1.00 per kWh…they did not mention about the variable cost, but there is a variable component of around P0.30 per kWh that was included in the offer that we received. So that’s about P1.30 (per kWh),” he said.

Valles explained “Meralco will be the one to look for fuel, but since this is Ilijan plant; the source of fuel is only Malampaya — and right now Malampaya gas is fully allocated to First Gen plants so we cannot source from elsewhere.”

He qualified that based on initial information gathered by Meralco, “the fuel coming from Malampaya, they have banked gas – and DOE (Department of Energy) or PSALM (Power Sector Assets and Liabilities Management Corporation) and First Gas are willing to re-allocate the gas to the Ilijan plant because Ilijan plant can only run on liquid fuel.”

Valles noted any unallocated capacity of the Malampaya gas has to be diverted to the Ilijan plant, otherwise, that generating facility will remain on shutdown – and the grid will continue to have lost capacity of 1,200 megawatts.

He stated that no less than Energy Secretary Raphael P.M. Lotilla sounded off that he wants Ilijan plant “to remain operational for the grid, so the only way to do it is to source fuel for it.”

The company executive specified though that “these mechanics have to be agreed upon first by Meralco, SMC and First Gas – and the moment we come to an agreement ,we need to get DOE approval and ERC (Energy Regulatory Commission) approval before that can take effect, so that would probably take time.”

Valles added “we’re trying to find a way on how to facilitate completion of everything, you know the written agreement within a week. I hope we can do it because the TRO (temporary restraining order) has been issued already” – that is in reference to a Court of Appeals verdict on the pending rate hike case of San Miguel for 670MW capacity of the Ilijan plant.

The Meralco executive further conveyed “we will talk to First Gen about it and then once we arrived at an agreement, we need to go to the DOE first for approval and if there’s blessing from the DOE, then that’s the time we go to the ERC.”

At this point, he pointed out that Meralco already secured a certificate of exemption from the DOE. “It was issued last week. But that’s only for the 670MW (because of the TRO), so the certificate of exemption is effectively covering only that amount of capacity which is 670MW,” he stressed.

Valles asserted “we’re doing everything possible to mitigate the impact of the TRO as well as the impact of any increases that will be brought about by the price offers of the different generators from the other EPSAs (emergency power supply agreements).”