PSALM to file a Motion for Reconsideration on ERC’s decision to penalize it for the Malaya Shutdown

22 Oct 2021

The Power Sector Assets and Liabilities Management Corporation (PSALM) is very surprised to receive the decision of the Energy Regulatory Commission (ERC) penalizing it for the shutdown of the Malaya Thermal Power Plant (MTPP) Unit 2. Said ERC decision was in connection with the investigation of the circumstances that caused the red alert and yellow alert that happened on 31 May 2021 to 2 June 2021. MTPP’s Unit 2 has not been in operation since 3 March 2021, long before the red alert and yellow alert incidents.

PSALM is of the position that there is sufficient ground to justify the shutdown of MTPP Unit 2. More importantly, PSALM cannot be blamed for having caused the subject red alert and yellow alert. It is preparing to timely file its Motion for Reconsideration on the said ERC decision.

It is of public knowledge that MTPP is a very old plant and is plagued with obsolescence issues which cannot be addressed despite PSALM exerting utmost due diligence. MTPP’s Unit 1 was commissioned way back in 1975 and Unit 2 in 1979.

To be specific, in its decision dated 08 September 2021 in ERC Case No. 2021-069, ERC declared PSALM administratively liable for having exceeded the allowable unplanned outages cap per year set for the MTPP, stating that this constitutes a violation of Article V, ERC Resolution No. 10, series of 2020, consequently ordering PSALM to pay the penalty of PHP980,400.00.

“Penalizing PSALM would be unfair because the Malaya Plant is actually way past its economic life already and it suffers from continuous deterioration in terms of reliability and efficiency. Malaya was on shutdown long before the red alert and yellow alert,” PSALM President and Chief Executive Officer Atty. Irene Besido-Garcia said.

Since 2018, PSALM had been exerting efforts to privatize the power plant that eventually culminated to a successful privatization activity on 7 May 2021. PSALM has openly expressed the need to rehabilitate the facility to improve its capacity and efficiency but has no funding to do the rehabilitation works. At the time of the red alert and yellow alert at the end of May 2021, the privatization bid deadline was done and the new owner was declared as the winning party. PSALM, at that point, could not implement any changes to the power plant. Any expenses shouldered by PSALM to improve the condition of the plant after the sale will expose PSALM to audit findings of the Commission on Audit.

Based on the report of Soosan ENS Co Ltd. (Soosan), the operator of the MTPP, the Automatic Voltage Regulator (AVR) of the Generator Excitation System of MTPP’s Unit 2 encountered a problem and was declared under forced outage on 3 March 2021, or long before the subject red alert and yellow alert. Soosan immediately informed ERC and NGCP of the outage on the same day. The assessment of the equipment required the outsourcing of a foreign company expert which could not be immediately procured because of the travel restriction due to pandemic. The only available AVR company would be able to come in June 2021 which was beyond the privatization deadline of 07 May 2021.

Due to the successful negotiated sale and privatization of MTPP on 07 May 2021, the said AVR assessment was no longer necessary since the new owner has the prerogative on how to repair MTPP. Further, the winning party, Fort Pilar Energy Inc. (assigned to Belgrove Power Corporation) has its own plans for the rehabilitation of the plant.

In view of these underlying reasons, PSALM will submit a motion for reconsideration to ERC to justify why no administrative penalty should be imposed on PSALM for the alleged violation of ERC Resolution No. 10, Series of 2020.

Article V of the Resolution provides for the allowable standard planned and unplanned outage days for the different generating plant technologies. In the case of MTPP, ERC said that the cumulative unplanned outage days from 03 January to 25 April 2021 is equivalent to 49 days exceeding by 21.2 days the outage cap of 27.8 days set for MTPP.

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