PSALM avoids losses by keeping plant offline during Malampaya shutdown

MANILA, Philippines – The Power Sector Assets and Liabilities Management Corporation (PSALM) said it avoided as much as P1 billion in losses by not running the 620-megawatt Malaya diesel power plant during November’s Malampaya gas facility shutdown.

At the House Committee on Energy hearing on Manila Electric Company’s (Meralco) power rate hike Wednesday, January 22, PSALM president Emmanuel Ledesma Jr. said the agency was tasked with keeping the government’s debts and losses from ballooning. (READ: Meralco: We did not mean to inflate power charges)

PSALM received criticism for not using the National Power Corporation’s (Napocor) Malaya plant. Critics believed it would have mitigated price spikes at the Wholesale Electricity Spot Market (WESM) during Malampaya’s 30-day maintenance shutdown.

Ledesma added, “If PSALM were to bid Malaya’s output into the WESM, the most logical bid price offer is for it to get scheduled for dispatch at a price where it could recover its production cost.”

According to Ledesma, the average daily clearing price at the WESM was around P3 to P5 per kilowatt-hour. The plant would therefore use revenues of around P390,000 to P650,000 for every hour of 130 MW of power dispatched. 

With a loss of P5 to P7 per kwh, leading to either P650,000 to P910,000 or P1.3 to P1.8 million per hour depending on the use of one or two units, this “would be equivalent to roughly P967 million to P1.35 billion in losses,” Ledesma said.

PSALM placed a bid at the WESM but didn’t synchronize the plant to the power grid because it did  not want to be dispatched. This avoided losses that would be shouldered by consumers under the universal charge for stranded debt.

Ledesma explained that when he joined PSALM in 2010, a mandate from Finance Secretary Cesar Purisima made it clear that he was to reduce the debt and fix the agency’s financials, as PSALM’s financials were not good at the time. 

The Malaya diesel plant costs around P10 to P11 per kWh to run, according to Ledesma. This meant PSALM would incur losses if the price at WESM was lower. 

Referring to selling power at a loss, Ledesma said, “The losses will be passed on stranded debt in the universal charge. It will go to the consumers, we cannot increase the losses so in my mind that is not a correct thing to do.”

“I feel, we cannot conclude if we operated Malaya as a must-run or not, it would have saved consumers more money…We haven’t done simulations on this,” he said. 

Power plants are requested to run by the grid as must-run units during a power supply shortage.

The House Committee on Energy has asked PSALM to send in simulations on how the Malaya facility’s potential impact on WESM prices. 

A PSALM official also said that the Malaya plant was available for dispatch to the power grid during the Malampaya shutdown, but was not told to provide extra supply. 

“We told PEMC (Philippine Electricity Market Corporation), DOE, NGCP (National Grid Corporation of the Philippines) that Malaya is available at anytime if they have insufficient supply but there was enough supply,” he said. – Rappler.com