Western Mindanao Power Corp. (WMPC), a diesel facility in Zamboanga City owned by Alsons Consolidated Resources Inc., on Wednesday served notice that the plant may need to cease operations, causing rotating brownouts in Zamboanga City and nearby areas over fuel constraint.
WMPC said it informed relevant government agencies that it was expected to exhaust its fuel supply in the coming weeks.
The company previously engaged in a non-firm ancillary services procurement agreement (ASPA) with the National Grid Corp. of the Philippines (NGCP), which enabled WMPC to provide critical power support to maintain grid stability in Mindanao and ensure a consistent power supply in Zamboanga City and nearby areas.
WMPC said this non-firm ASPA expired on April 25, and while NGCP awarded a new firm ASPA to WMPC in April 2023, its implementation was on hold pending approval from the Energy Regulatory Commission (ERC).
Under a non-firm ASPA, power plants are not guaranteed to always provide ancillary services to the power grid.
WMPC faced about P50 million in losses from January to March 2024 as power plants holding new firm ASPA contracts received provisional authority from the NGCP.
“Power plants with non-firm ASPAs, such as WMPC were deprioritized in this arrangement. Unless the ERC approves our ASPA, we will lack the necessary funds to recover our losses and procure fuel for the continued operations of WMPC,” said Jose Luis Angco, WMPC vice president and business manager for plant operations.
“Operating a diesel plant is costly. Without an approved and acceptable ASPA, we will incur unrecoverable losses that affect our ability to replenish our fuel stock. This will force us to reduce and eventually halt our operations,” Angco said.
ERC chairperson Monalisa Dimalanta said in response that they were expecting to take action in the next few days.
Zamboanga is situated at the end of a long transmission line, 270 kilometers away from the nearest base load power station.
WMPC said without the reactive power support that only the company could provide, the voltage in the city would drop to unsustainable levels, leading to power fluctuations and, worse, outages—especially during peak hours.
The ERC acknowledged the higher fuel costs associated with diesel plants. It said these plants were crucial as they serve as safeguards against potential blackouts, particularly during periods of increased power demand, such as those experienced during El Niño events.
WMPC said, however, diesel plant operations are not viable without an acceptable ASPA contract, as they struggle to recover their operational costs.
They are often contracted only during peak demand periods and are compensated only a fraction of the necessary charges, making these payments insufficient to cover fuel and other operational expenses throughout the entire year.
The NGCP designated WMPC as a must-run unit to provide essential ancillary services, especially during this time when the country faces yellow and red alerts, despite the expiration of its ASPA.
“Currently, WMPC operates as a must-run unit participating in the Wholesale Electricity Spot Market. However, this setup is not sustainable. We anticipate incurring significant losses after the summer season when the plant might be dispatched for voltage correction at a reduced rate of between P3 to P6/kWh.,” Angco said.
“We aim to continue providing the necessary ancillary services to support NGCP in ensuring a sustainable power supply in Zamboanga all throughout the year. Nonetheless, the approval of our ASPA is crucial for us to continue operations, as it allows us to recover costs and maintain our activities,” he said.
The Zamboanga City Electric Cooperative expressed concerns over the expired ASPA between the NGCP and the WMPC. The electric distribution utility emphasized the critical need for ancillary services in Zamboanga City to maintain a stable power supply.