DOE aims ‘no rate hike’ on Malampaya shutdown

The Department of Energy (DOE) is aiming for a "no rate hike" scenario that will result from the two-week shutdown of the Malampaya gas production facility this February.

If the agency’s calculations will turn out accurate, that will be a "historic first" in such activity in the power system’s supply chain.

The gas facility will be on its scheduled maintenance downtime within February 4-18 this year – and if that would be gauged versus the industry’s past experiences in the past two decades, Malampaya’s planned outages had always resulted in supply tightness as well as rate spikes.

Energy Undersecretary Rowena Cristina L. Guevara said the ‘no rate hike’ circumstance “is the best case scenario...when we do not have to run other plants,” qualifying that since the shutdown will be happening in February, this will still fall on a low-consumption period.

She qualified that the calculated cost impact of P0.7897 per kilowatt hour (kWh) – primarily for the gas-sourced supply component of power utility giant Manila Electric Company (Meralco) will only happen if the Santa Rita and San Lorenzo generating assets will be dispatched on their committed full load of 314.62 megawatts (for Santa); and 141.88MW (for San Lorenzo) -which are both contracted plants of Meralco.

The installed capacity of the Santa Rita plant is at 1,000MW; while the San Lorenzo generating facility has 500MW capacity - but the energy official emphasized that during Malampaya’s shutdown, their ‘full load’ had been re-defined based on their committed generation run within the gas field’s outage timeframe only.

Guevara stated that this year’s Malampaya maintenance shutdown comes off around different conditions compared to the last repair activities carried out in October 2021– inferring that demand on those 20-day period two years ago had been higher compared to the cooler weather this February.

Nevertheless, historical narrative would show that Malampaya also had its maintenance activity on a low-consumption period of January 28 to February 16 in 2017 - and that still resulted in rate hike of P0.66 per kWh, which the Energy Regulatory Commission (ERC) had approved to be billed on staggered basis for three (3) months or from March to May 2017.

Back then, the incremental cost that triggered the Meralco rate hike had been the gas plants’ shift to liquid fuel, which was notably more expensive than the Malampaya gas.

Within January to February 2017, global oil prices had just been hovering above $50 per barrel; while present-day prices top $80 per barrel – as anchored on Dubai crude prices, which is also the linkage being enforced for the Malampaya gas.

As reckoned, it’s the differential between the ‘business-as-usual” price versus the gas plants’ utilization of liquid fuel that has actually been driving up the rate hikes – and not so much the cost swings at the Wholesale Electricity Spot Market.

Guevara specified “there’s no problem in supply as far as February 4-18 when Malampaya is going to be maintained.”

She further stressed the P0.79 per kWh calculation of Meralco as additional cost had been based on assumptions that “the two plants will run full blast – but we will only know that on those days (shutdown period) because that will depend on the consumption of the end-users. So, if they (plants) will run lower, the cost impact would not be as much.”