“The Malampaya gas producer believes so—but Meralco thinks otherwise.”
The results of the supply auction for 1,200 megawatts of electricity have elicited mixed responses from contending major generation companies.
Manila Electricity Co. (Meralco), the nation’s biggest electricity supplier, awarded its supply requirement of 1,200 megawatts to South Premiere Power Corp. (SPPC), a unit of San Miguel Global Power Holdings Corp. (SMGP)
SPPC’s offer of P7.0718 per kWh for 1,200 MW is lower than the reserve price of P7.1538 per MW set by the Energy Regulatory Commission.
First Natgas Power. Corp. (FNPC) of First Gen Corp. lost with what is seemingly a high bid rate of P8.4489 per kWh for a 210-MW of capacity. The unincorporated joint venture of Limay Power Inc. and San Roque Hydropower Inc. submitted the next best bid after tendering P7.1006 per kWh for a 150-MW capacity.
FNPC’s failure to win part of the auction, meanwhile, eliminated the indigenous Malampaya gas fuel from the competition outright.
FNPC’s write-off from the bidding process gave rise to claims and counter-claims after I wrote a column about the hidden costs of electricity pricing in the Philippines on March 1, 2024. My piece essentially raised this question: Is imported liquefied natural gas (LNG) costlier to use than Malampaya gas?
The Malampaya gas producer believes so―but Meralco thinks otherwise.
One of the challenges that the country’s energy industry had to address is the cost associated with using natural gas. An industry source conceded that the Philippines could not live without gas-fired power plants, especially with the moratorium on development of new coal power stations and the scale of supply that the former could deliver.
Even the Department of Energy (DOE) itself, the source noted, has been promoting natural gas that it even issued a directive in October last year to enjoin electricity distributors in Luzon to conduct CSP for power supply using indigenous natural gas as transition fuel.
The competitive bidding process, said the source, would precisely result in lower pricing but the DOE’s move to prioritize indigenous natural gas “might not be the best move.”
Meralco found First Natgas’ bid of P8.45 per kilowatt-hour/kWh even surprising.
Generation charge tables uploaded by Meralco on its website showed that the highest rate of First Natgas in the last three years was the rate last month at P6.60/kWh―even with imported LNG already blended into the fuel mix.
Meralco deduced that indigenous natural gas may not really beneficial to consumers. It cited recent TV report showing that recent prices of Malampaya gas were at $13.05/million British Thermal Units―cheaper than liquid condensate at $18.60/MMBtu but still more expensive than imported LNG at $12.38/MMBTu.
If First Natgas secured that contract and priced its supply at that rate, consumers would see an increase of around P2/kWh in their monthly generation from the exact same power plant for the exact same baseload supply, the source claimed.
The Malampaya producer, however, contested the figure. Malampaya gas is $12.38 per MMBtu while imported LNG is $14.55 per MMBtu, or 20 percent more expensive. Imported LNG reached $15.78 per MMBtu at one point last year.
“But the cost of the product itself is not the main driver of the rates that Meralco passes along to consumers. It is transport, or freight cost, which plays a bigger role in whether the electric bills that consumers get monthly rise or fall, with the former happening ordinarily,” says the producer.
Collusion?
The Malampaya proponent claims that it smelled collusion among the nation’s biggest power generators following a partnership among San Miguel, Abotiz Power Corp. and Meralco. Meralco unit Meralco PowerGen Corp. and Aboitiz Power are jointly investing in two of San Miguel Global Power Holdings Corp.’s gas-fired power plants in a deal that could be worth $3.3 billion.
The parties did not disclose the acquisition cost, but the 1,278-megawatt Ilijan power plant and a new 1,320-MW combined cycle power facility, including their terminal and land, were valued at $3.3 billion.
The Malampaya proponent questioned the role of MGen, the power generating arm of Meralco that uses mainly coal. MGen owns power plants, mainly coal-fed, and contracts electricity from companies that also generate power, including San Miguel.
“This effectively skirts the prohibition on power distribution utilities from engaging in power generation themselves to prevent conflict of interest,” a Malampaya source said, citing the Electric Power Industry Reform Act (EPIRA) of 2001.
Such claims and counter-claims should be resolved and reconciled at once by higher authorities. The consumers and the nation as a whole deserve lower electricity charges, which are still one of the highest in this region.
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