With the failed bidding outcome on the appointment of Independent Power Producer Administrator (IPPA) for the 650-megawatt Malaya thermal power plant (MTPP), its plant operator Korea Electric Power Corporation (KEPCO)-Philippines renewed its appeal to the Power Sector Assets and Liabilities Management Corporation (PSALM) on the deferment of the asset’s privatization, at least in the next three years or until such time that power supply in the Luzon grid stabilizes.

“We reiterate our request for the Philippine government, thru PSALM, to reconsider its position on the privatization of the MTPP and consider deferring the same until the time when a substantial generating capacity has been added to the Luzon grid that will normalize the existing precarious power supply situation,” KEPCO Philippines President Bok-Yull Lee said.

Kephilco is the government’s counterparty in the 15-year Rehabilitation Operation Maintenance and Management (ROMM) agreement (a variance of Build-Operate-Transfer deal) that entered into by state-run National Power Corporation (NPC) for the facility. The arrangement is due to lapse January next year, entailing that the Malaya plant will already be turned over then to government hands.

For this, even government energy planners see the logic of aligning the Malaya facility for ‘security capacity’, one that will plug capacity gap or provide voltage support to the grid, especially during outages of any of the major generating units in the Luzon grid.

The other facility eyed by PSALM for security capacity is the mothballed 850-megawatt Sucat thermal power facility, but since the plant has not been operating in the past 10 years, there is no guarantee that it can still perform such function or if it can even be operated at all.

“In government hands, the 650-MW Malaya thermal power plant can be relied upon to significantly contribute to the security of power supply in the Luzon grid for at least three more years without a major rehabilitation,” Lee said.

KEPCO recently invited the NPC Board Review Committee headed by Finance Undersecretary Jeremias N. Paul and Philippine Electricity Market Corporation (PEMC) president Melinda L. Ocampo at the Malaya plant to discuss the extent of the rehabilitation done at the units and also to brief them on the significant role the facility plays in the Luzon grid.

Aligned by the system operator as a must-run unit (MRU), it must be noted that the Malaya plant was relied upon heavily during the periods when the grid was suffering from recurrent supply shortages.

There have been assessments that if the Malaya facility will be transferred into private hands, it will end up a losing proposition for the taker because it immediately needs to shell out cash for the facility’s rehabilitation to make it compliant with the emissions standard under the Clean Air Act.

Given the additional investment that the buyer will cough up as well as the higher cost of procurement for cleaner fuel to run the facility, it has been noted that the electricity to be drawn from the Malaya facility will turn out more expensive.