Meralco, FGEN discuss SMC Ilijan plant offer

MANILA, Philippines — The Manila Electric Co. (Meralco) will attempt to woo First Gen Corp. to divert the use of its natural gas allocation from Malampaya to the 1,200-megawatt Ilijan gas-fired power plant of San Miguel Corp (SMC).

The move is in line with SMC’s offer to Meralco for the use of the Ilijan plant at minimal tariff to help stabilize power supply and lower electricity rates in the coming months.

Under the offer, Meralco will be the one to procure the fuel for the gas-fired power plant.

“But since this is Ilijan plant, and you know very well the source of fuel is only Malampaya, and right now Malampaya gas is fully allocated to First Gen plants, we cannot source from elsewhere,” Meralco first vice president and head of regulatory management Jose Ronald Valles said.

Valles said Meralco would discuss with First Gen if the latter could reallocate to the Ilijan plant the Malampaya gas, which the Lopez-led firm is using for its own natural gas-fired plants.

Unlike the Ilijan facility, the First Gen plants can run on liquid fuel.

“If the fuel of gas of Malampaya will not be diverted for the use of the Ilijan, then the Ilijan plant will remain shut. So you lose the 1,200 MW capacity on the grid,” Valles said.

“As I understand from Energy Secretary Raphael Lotilla, he wants the 1,200 MW to remain operational in the grid, so the only way to do it is to source fuel for it. So you will divert the fuel of First Gen, transfer it to Ilijan for Ilijan to run using natural gas and for the First Gen plants to run on liquid fuel. But the liquid fuel has to be a pass through cost to us so those are the mechanics generally,” he said.

Valles said the proposal to First Gen is purely for public interest.

“Our objective is we want to be able to add that 1,200 MW back to the grid because Ilijan was gone when their contract with the government expired. So the goal is for that to return so that we won’t have shortage of supply during summer,” he said.

Valles said the mechanics on the proposal would have to be agreed upon first by Meralco, SMC and First Gen, after which an approval from both the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) will be sought.

“We’re trying to find a way on how to facilitate completion of everything, the execution of the written agreement, within a week. I hope we can do it because the temporary restraining order (TRO) has been issued already so we don’t know when SMC will terminate,” Valles said.

SMC power unit San Miguel Global Power over the weekend announced that it has offered to make the full capacity of its Ilijan natural gas plant available to Meralco for a fraction of its capital cost to help keep electricity prices as low as possible for consumers, while ensuring steady supply of power in the coming months.

The offer, covering the full 1,200 MW capacity of the plant, will cost Meralco a minimal P1 per kilowatt hour (kWh) in capital recovery fee, or half of its capital cost on the facility, and a variable component of P0.30 per kWh.

“So we’re doing everything possible to mitigate the impact of the TRO, as well as the impact of any increases that will be brought about by the price offers of the diff generators under the other emergency power supply agreements (EPSAs),” Valles said.

Valles said Meralco has so far secured the certification of exemption from the DOE for EPSAs covering 670 MW.

The Court of Appeals issued last month a TRO effective for 60 days in favor of SMC’s South Premiere Power Corp., suspending the implementation of its PSA with Meralco.