Temper price spikes during Malampaya repair

The Department of Energy (DOE) is preparing measures to mitigate the effects of the scheduled January 2017 shutdown of the Malampaya gas field on electricity costs, specifically to prevent a repeat of the price spikes following a similar incident three years ago.

In a statement, Energy Secretary Alfonso Cusi said he has directed the department to start preparatory activities jointly with industry stakeholders “to safeguard energy consumers from possible impact on supply and prices of electricity.”

The Malampaya gas field is scheduled to be shut down for maintenance activities from Jan. 28 to Feb. 16, 2017.

“My directive was clear: The Malampaya maintenance activities should pose no substantial impact to supply of electricity by using all available resources and remedies, because power is a basic necessity for our countrymen,” Cusi said.

He added plans and alternative modes should be in place and ready before the actual shutdown.

“We have to ensure that the program works for Malampaya is within the prescribed schedule given to the DOE,” he added. “Historically, Spex (Shell Philippines Exploration Corp.) completes its maintenance period on time. It is expected that it will do the same this time.”

In a meeting with industry participants last Dec. 15, the DOE was apprised by Spex of the preparatory works for the Malampaya services maintenance shutdown.

According to Spex, the maintenance activities would cover the repair of the sub-sea facilities, upgrades on the platform and maintenance on the onshore plant.

On the power situation outlook, the National Grid Corporation of the Philippines (NGCP) was tasked to simulate the possible power supply scenarios, while the Philippine Electricity Market Corp. (PEMC) will conduct a simulation on the Wholesale Electricity Spot Market (WESM) prices during the Malampaya shutdown.

“The simulations will be submitted to the DOE for review and evaluation, so that we will be able to accurately respond to any unwarranted power market behavior,” Cusi said.

The Manila Electric Co. also said its price simulation would factor in possible WESM price movements due to plant outages during the maintenance period, and generation cost adjustments of natural gas plants due to change in liquid fuel (diesel and condensate) which is more expensive than Malampaya’s natural gas.

In effect, the Meralco simulation projects an increase of around P1/KWh on the generation cost rate that will be billed for the period. In case this happens, the spike may be felt by their captive customers in the March 2017 billing period.

“There will be an increase, but what we will do is to minimize the increase to soften the burden to our consuming public,” Cusi said.

To ensure power reserves during the summer period, the 600-megawatt block of Ilijan Natural Gas Power Plant in Batangas will schedule its maintenance shutdown to coincide with the Malampaya downtime period.