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DOE orders use of Malaya plant to boost grid

Oil-run facility named ‘must run’ unit to shore up ‘thin’ power reserves
By: - Reporter / @amyremoINQ
/ 11:44 PM February 09, 2014

The Department of Energy has designated the 650-megawatt Malaya thermal power plant in Rizal as a “must-run” unit in the wholesale electricity spot market (WESM).

In the circular signed on Jan. 22, Energy Secretary Carlos Jericho L. Petilla said the move would help ensure adequate supply of power in the Luzon grid.

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Must-run units (MRUs) refer to power generation facilities that could help secure the country’s power supply, especially when supply is barely enough to cover demand.

However, when a facility is designated as a must-run unit, the owner of the power facility could ask for additional compensation to recover additional costs it will incur for running at maximum capacity.

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These additional costs may include the cost of fuel; variable operating and maintenance costs; and start-up and shut-down costs.

“The DOE recognizes that the Malaya thermal power plant was designed and previously operated as a base load plant and its distinct technical and operational characteristics make it difficult to comply with the must-offer rule without incurring losses due to high costs of operations,” the circular stated.

The must offer rule, as provided under the WESM rules, provides that trading participants must submit bids or offers corresponding to the facility’s maximum available capacity.

According to the circular, the technical limitations of the Malaya thermal power plant “make it difficult to comply with the must offer rules and be compelled to run at minimum level at all times, which exposes the Malaya plant to operate at a loss since its production cost is above the normal market clearing prices, particularly during off-peak hours.”

“The Malaya thermal power plant shall [thus] be exempted from the must offer rule and shall continue to be utilized as a must run unit in the WESM,” it said.

To ensure the efficient implementation of the circular, the DOE has directed the Philippine Electricity Market Corp. (PEMC), operator of the WESM, to ensure that the Malaya facility be compensated for its operations.

The state run Power Sector Assets and Liabilities Management Corp. was also directed to ensure efficient operation of the Malaya facility as well as its readiness to operate as a must-run unit.

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Petilla said last week that the DOE would run the Malaya thermal power plant from March up to August this year to help shore up supply in Luzon, which is expected to face “tight or thin” reserves during the summer months.

The Malaya plant can generate at least 150 MW and a maximum of 610 MW.

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TAGS: Business, Luzon grid, Malaya thermal power plant, power sector, Wesm, Wholesale Electricity Spot Market
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