Malampaya gas restrictions caused 66% of MERALCO rate hikes in 2021

meralco malampaya

Gas production restrictions from the Malampaya field accounted for around 66% of all increases in the bills of Manila Electric Company (MERALCO) customers this year.

MERALCO, based on a Manila Bulletin report, said in its official correspondence to the Senate Committee on Energy that of the total Php1.04 per kilowatt-hour (kWh) worth of power rate hikes in 2021, Php0.69/kWh could be attributed to the restrictions.

A gas restriction happened in March, which lasted over two months and became one of the causes of the Luzon Red Alerts from May 31-June 2, with the derating of the 1,200-megawatt (MW) Ilijan gas-fired power plant. Another gas restriction happened, however, in June just over a week after the first one was lifted.

MERALCO FVP Jose Ronald Valles, who heads the power giant’s regulatory management office, said in the report that the Php0.69/kWh Malampaya-related increase represented the re-pricing of its natural gas to reflect the movements in global crude oil prices.

Valles further stressed that of the rate hikes connected to Malampaya, around Php0.36/kWh of tariff escalation was due to the use of more expensive liquid fuels during the gas restrictions.

The incidents forced First Gen Corporation’s 97MW Avion, 500MW San Lorenzo, and 1,000MW Sta. Rita gas plants to use more expensive liquid fuels. However, the 414MW San Gabriel plant was unable to do so, hence First Gen had to declare force majeure.

Nonetheless, the power giant said that when San Gabriel declared force majeure, it also needed to source replacement electricity from the Wholesale Electricity Spot Market, which had peak prices at that time.

In addition, Valles said that the Php0.20/kWh increase could be attributed to the peso’s depreciation against the US dollar, which in turn affected billings of First Gen’s plants to MERALCO since the contracts are dollar-denominated.

He primarily cited that the additional costs incurred were passed on to consumers via the generation charge — the largest chunk of the MERALCO electric bill. MERALCO gets power from all the five gas plants.

The gas restrictions are said to be connected to Malampaya’s dwindling supply. Malampaya is currently on maintenance shutdown, which began on Saturday and will last until the third week of October.