Malampaya shutdown starts today

By Lenie Lectura – January 28, 2017

from Business Mirror

Power-industry stakeholders have finalized contingency plans that would address a possible supply-deficiency scenario during the 20-day shutdown of the Malampaya gas facility, which supplies 40 percent of the Manila Electric Co.’s (Meralco) requirement, that starts today, Saturday.

Shell Philippines Exploration BV (SPEx), operator of the gas facility, said the maintenance activities will cover the repair of the subsea facilities, upgrades on the platform and maintenance on the onshore plant.

“SPEx is ready,” Energy Undersecretary Felix William B. Fuentebella said in a text message, when sought for an update.

During the third coordination meeting among stakeholders—composed of the Department of Energy (DOE), the Malampaya Consortium, National Grid Corp. of the Philippines (NGCP), Meralco, Power Sector Assets and Liabilities Management Corp. (PSALM), Philippine Electricity Market Corp. (PEMC), power-generation companies and other distribution utilities—it was agreed that the power plants that will be affected while maintenance work is being undertaken will run on alterative fuel, which is more expensive than gas.


Price shock

This also means that power rates will go up. The Malampaya shutdown will start on January 28, and will last until February 16.

“We’ve already conducted a series of coordination meetings, simulations, and exhausting all possible measures that we can implement to ensure supply and avoid price shocks,” Energy Secretary Alfonso G. Cusi said.

According to Meralco, generation rates may increase by P1.18 per kilowatt-hour (kWh) to be reflected in March electricity bills. With tax, the rate hike could reach P1.44 per kWh.

“The estimated effect on the generation charge of the use of liquid fuel and on spot prices of plant outages is P1.18/kWh. If we include VAT [value-added tax] and other charges, the overall impact is approximately P1.44/kWh,” Meralco Utility Economics Head Lawrence Fernandez said in a text message.

The generation charge for this month stood at P3.70/kWh. The rates for February would be announced by Meralco within the first week of the month.

The gas facility fuels three gas plants: the 1,000-megawatt (MW) Santa Rita, the 500-MW San Lorenzo and the 1,200-MW Ilijan.

Fuel factor

These plants will be using alternative fuel to continue operation and generate electricity during the maintenance period. However, this is more expensive than natural gas. Natural gas as fuel only costs around P4/kWh, while replacement fuel, such as diesel, costs around P6 to P8 per kWh.

“It’s an issue of a change of fuel from a cheaper one to a more expensive one,” said Fuentebella, when asked if a rate hike could be avoided.

To mitigate the anticipated spike in power rates, the DOE said a staggered payment of additional generation cost from having to use more expensive fuel is possible.

The First Gen Corp. of the Lopez Group told the DOE that all six units of Santa Rita and San Lorenzo will run using condensate, while its new Avion plant will run using liquid fuel at 76 MW to 84 MW.

“Fuel delivery is delayed, but the vessel containing the fuel is already in the Philippines. Fuel analysis for specifications is being done, and the vessel is to be cleared by customs. Santa Rita and San Lorenzo can run up to February 11 for the existing fuel stock [condensate]. They will run with diesel if the delivery did not push through,” a report from the January 23 coordination meeting stated.

The DOE assured the public that it continues to explore all possible options and remedies to maximize protection for consumers.

During the maintenance activities, some power plants are on scheduled maintenance, as well. With this, the DOE expects a total supply of 1,850 MW to be out during the period—200 MW from Calaca 1 power plant, 456 MW from Quezon Power Philippines Ltd., 600 MW from block one of Ilijan, 414 MW from San Gabriel and 180 MW out of the 600 MW of the second block of Ilijan plant.


NGCP could issue yellow or red alert warnings during the period.

A yellow alert means contingency reserve is less than the capacity of the largest synchronized unit of the grid. In Luzon this is equivalent to 647 MW, or one unit of the Sual power plant. A red alert, meanwhile, means there is severe power deficiency.

Based on the latest outlook, NGCP reported to the DOE that the highest peak demand of 8,610 MW could occur on February 9, during the maintenance activity. The report also stated, “Luzon will be on yellow-alert notice from February 8 to 10, 2017.”

The lack of power supply would be addressed by tapping power plants owned by the government and the private sector.

For instance, in the latest report, the government-owned 470-MW Malaya Thermal Power Plant in Pililla, Rizal, would be utilized on February 13 and 16  at 130 MW to avert a yellow-alert notice.

The government also considered to tap Malaya on January 27 and 30, and on February 4, 6 and 11 to avert yellow-alert notice and red-alert notice.

The Malaya plant has already conducted heat run tests for Unit 1 and Unit 2 on January 11 and 17, respectively.

According to PSALM, the declared available capacity of Malaya is 150 MW for Unit 1 and 320 for Unit 2. On fuel inventory, it reported to the DOE that there is available  31.82 million liters, which is sufficient to run both Malaya units at registered minimum stable loadings, 130 MW each, for 18 days.

“There will be additional fuel delivery in the first week of February,” PSALM said.

Also, the Caliraya reservoir will be raised to 288.5 meters above sea level (masl) to ensure availability of four units.

NPC said, “The CBK [Caliraya-Botocan-Kalayaan] confirmed to raise the level of Caliraya lake to 288.5 masl.”

Limay plant

SMC Global Power Holdings Corp., meanwhile, is willing to assist the government in providing cheaper power to be sourced from its newly built power plant in Limay, Bataan, during the 20-day shutdown of the gas facility.

Makakatulong kami kahit during the Malampaya shutdown, kasi nag-pro-produce na ng 150 MW ang Unit 1,” SMC President Ramon S. Ang said, when asked to comment on an earlier pronouncement of the DOE that the commercial operation of the Limay plant should be done earlier.

The first 150-MW unit of the Limay circulating fluidized bed (CFB) coal facility is currently undergoing commissioning, with target commercial operation in May this year, Ang said.

The second unit, another 150 MW, is scheduled for commercial operation three months after.

Unit 1, while on commissioning phase, uses diesel, which is more expensive than coal by at least P5 per kWh.

Ang said the company is willing to subsidize the difference.  “Tumatakbo na ang Unit 1, pero mas mahal kasi ginagamitan ng diesel. But we will help the grid to make sure hindi magkakaroon ng shortage. Okay lang iyun, pagbibigyan na namin iyun,” he said, when asked if the company woul