Energy players to review existing deals caused by plant shutdowns

By Lenie Lectura – March 9, 2017

from Business Mirror

POWER-INDUSTRY stakeholders will review existing contracts entered into among gas suppliers, power producers and distribution utilities to find out ways on how not to pass on to consumers the incremental cost brought about by the shutdown of power plants.

“We are going to look into the GSPA [gas-supply purchase agreement] between SPEX [Shell Philippines Exploration BV] and the power plants, then the PSA [power-supply agreement] between the power plants and the distribution utility. We will look into these contracts and ask their inputs on how to address the policy of Energy Secretary Alfonso G. Cusi that there should be no price shock,” Energy Undersecretary Felix B. William B. Fuentebella said in a news conference on Wednesday.

The 20-day maintenance shutdown of the Malampaya natural-gas facility resulted in an incremental liquid-fuel cost at P0.66 per kilowatt-hour (kWh) that would be passed on by the Manila Electric Co. (Meralco) to power consumers.

Fuentebella was referring to Cusi’s pronouncement the Department of Energy (DOE) is keen on looking for ways of not passing on to consumers the incremental cost brought by the shutdown.

“We are planning to hold a conference among those involved to address a no pass-on policy,” Cusi said.

SPEX Managing Director Don Paulino, who was also present during the news conference, was asked if the company was willing to amend its GSPA with First Gas Corp. and Kepco Phlippines.

First Gas and Kepco are sourcing natural gas from the Malampaya gas field to run their gas plants.

“The first thing is we have a contract with the gas users. We need to talk with them and the DOE and Meralco and see what we can do. We are willing to explore opportunities,” Paulino said.

The GSPA of SPEX with the gas plants and the PSA between the power plants and Meralco allow incremental cost to be passed on to consumers, Fuentebella said. These contracts were all approved by the Energy Regulatory Commission (ERC).

Meralco Utility Economics Head Lawrence Fernandez said the parties must “agree upon” any changes that will be made in the contract. Should there be any changes, “these will have to pass the legal test”.

Fuentebella said if all parties are willing to cooperate, then “the sanctity of the contracts will not be violated.” He said the ERC would also be involved in the discussion.

Paulino could not say when the next scheduled maintenance shutdown of the Malampaya gas facility will be. Prior to this year’s 20-day shutdown, the facility underwent the same maintenance work in 2015 and 2013. It is expected there could be two or three more maintenance shutdown incidents at the Malampaya gas field before the license of SPEX expires in 2024.

Fuentebella said it will take a year for all concerned parties to work on the possibility of not passing on to consumers any incremental cost.

“That is our goal na sa susunod na Malampaya shutdown ay walang price shock,” the DOE official said.

The Malampaya Gas-to-Power Project supplies natural gas to five natural gas-power plants located in Batangas, namely, Santa Rita (1,000 MW), San Lorenzo (500 MW), Ilijan (1,200 MW), Avion (97 MW) and San Gabriel (414 MW).

These plants supply an aggregate capacity of 2,565 MW to Meralco’s franchise area.