DoE chief warns of possible power rate hike in August

Energy Secretary Jose Rene D. Almendras

MANILA, Philippines–Energy Secretary Jose Rene Almendras on Friday warned consumers to brace for a possible increase in electricity prices in August due to the planned nine-day maintenance shutdown next month of the Malampaya gas field off Palawan.

In a briefing Friday, Almendras explained that the three natural-gas fired power plants in Batangas, which rely solely on the Malampaya field, would have to use the more expensive liquid condensates to ensure continued operation during the shutdown.

The 1,200-megawatt Ilijan, 1,000-MW Sta. Rita and 500-MW San Lorenzo gas plants generate 40 percent of the power requirements of the Luzon grid.

“Electricity prices may increase in August because the fuel mix will change during that period. We expect spot prices to be affected. This is a free market. If you shut down cheap power generation and replace it with an expensive generation, [consumers] need to pay for that,” Almendras said.

The cost of generating power during a certain month is often reflected on a consumer’s electricity bill the following month.

The upside to this situation, according to Almendras, was that Luzon would be assured of adequate power supply despite the Malampaya shutdown.

“We have prepared all the generating plants that will take up the load that will be shed by the interruption. Although the three gas-fired plants in Batangas, which generate a total of 2,700 MW for the Luzon grid, can run on alternative fuel,” Almendras said.

“We’ve been planning for this so if there is a brownout, that means that something that was not supposed to happen, happened. We’ll be on green alert because we do not expect all three gas plants to be derated. They will still generate, but using the condensates,” he added.

The unexpected outage at the Malampaya field last weekend was expected to have only a minimal impact on electricity prices in July. A slight increase is expected since the outage lasted less than two days and during a weekend when electricity consumption was much lower compared to weekdays.

Consumers, however, could look forward to a likely rollback in fuel prices next week as prices in the global market continued to soften this week, according to Almendras.

Based on estimates made by Eastern Petroleum chair Fernando Martinez, oil companies might cut prices of diesel by 30 centavos a liter and of gasoline by 60 centavos a liter.

“We are very happy that [oil prices continue] to go down in the international market, but it should not stop us from preparing for the time that it will go up again. We are now at the level of 2008 prices–we are even cheaper than the cheap rate of 2008. While that’s very good, the question is how long it will last,” Almendras said.