MGEN Thermal prioritizes reliability as Panay demand rises

By Rjay Zuriaga Castor

ILOILO CITY — Meralco PowerGen Corp.’s (MGEN) thermal energy arm is prioritizing the reliability and efficiency of its existing power plants in Panay Island as electricity demand continues to rise.

The company has no specific plan yet for a new baseload facility on the island.

MGEN Thermal Energy President and Chief Executive Officer Arnel L. Santos said the company’s immediate focus is to address vulnerabilities in the power grid by ensuring its existing generating units remain available and operate without deratings.

“We acknowledge the vulnerability of the grid, the tightness of the grid as shown by recent experiences. This has really reinforced for us the criticality of ensuring that our current assets are reliable, not only available, but also not derated,” Santos said Friday.

MGEN Thermal is the thermal energy division of MGEN that delivers dependable baseload power to support energy security in the country.

Santos said MGEN Thermal is working to minimize, if not eliminate, two major reliability concerns: unplanned downtime or forced outages and deratings.

Unplanned downtime and forced outages happen when a power plant’s generating unit suddenly stops working due to unexpected equipment failure.

Deratings occur when a plant runs safely, but at a reduced power capacity.

He said the company has been assessing the vulnerabilities of its assets and identifying measures to strengthen their reliability and efficiency, including interventions beyond regular annual preventive maintenance schedules.

“This is a significant part of our focus, especially in the short to midterm, because this will be part of the couple of years to really elevate the performance of our fleet,” Santos said.

He noted that the overall availability of MGEN Thermal’s assets is already above 90%, which he described as “almost best in class.”

He said the company nevertheless remains focused on preventing outages given the vulnerability and tightness of the Visayas grid.

Panay currently has four baseload generating units, consisting of three units operated by Panay Energy Development Corp. (PEDC) and one unit operated by Palm Concepcion Power Corp. (PCPC).

PEDC Units 1 and 2 each have a capacity of about 83 megawatts (MW), while Unit 3 has a capacity of 150 MW.

PCPC operates a 135-MW unit in Concepcion, Iloilo.

MGEN operates PEDC through MGEN Thermal.

PEDC Unit 3 went offline in May due to an equipment failure and was synchronized back to the grid July 2, ahead of schedule.

The Department of Energy described the restoration as helping stabilize the Visayas power supply, which continues to face a series of red and yellow alerts.

Santos said MGEN is also looking at investment opportunities from a broader perspective rather than focusing solely on another thermal or baseload facility.

“We are always looking at the total picture for MGEN,” Santos said.

He noted that the company has both renewable energy and thermal generation assets, with potential investments being evaluated “holistically” as part of its overall energy mix.

“Definitely, any investment opportunities are being done holistically, and that’s ongoing […] For sure, opportunities are being looked at as we speak in totality because it is an energy mix,” he added.

Panay’s vulnerability 

Both the DOE and the leadership of PEDC previously acknowledged that Panay Island faces growing electricity demand that could eventually put pressure on its existing baseload capacity.

In October 2025, PEDC said the island’s baseload capacity would match its actual power demand by 2026.

In December 2025, DOE Secretary Sharon Garin said Panay Island needs additional baseload power plants as electricity demand, particularly in Iloilo, is growing much faster than the national average.

In December, no less than DOE Secretary Sharon Garin said Panay Island needs additional baseload power plants as electricity demand, particularly in Iloilo, is growing much faster than the national average.

She warned that Panay’s limited number of baseload plants means reserves could become increasingly thin, making the island vulnerable to a “domino effect” if one or more plants trip.

In August, Robinson Descanzo, president and chief executive officer of the Independent Electricity Market Operator of the Philippines Inc. (IEMOP), said the Visayas power grid continues to face transmission and generation constraints that limit the movement of electricity across islands.

These constraints force the region to rely on more expensive power sources even when lower-cost electricity is available from Luzon, he said.

Descanzo noted that the Visayas has a geographically fragmented power system composed of several island sub-grids with varying levels of electricity supply and demand.

While some areas have excess generating capacity, the inability to efficiently transfer electricity due to transmission limitations reduces the overall efficiency of the regional grid.

Panay, in particular, is in a moderate surplus position, with 691 MW of installed generating capacity in 2026 against an average demand of 343 MW and a peak demand of 473 MW.

That peak demand represents a 2.6% decline from 2025.

Despite its seemingly adequate generation level, Descanzo emphasized that transmission capacity is the primary constraint preventing cheaper electricity from reaching consumers.

According to IEMOP, power from Luzon enters the Visayas through the Leyte-Luzon High Voltage Direct Current (HVDC) interconnection, which has a transfer capability of 420 MW from the Visayas to Luzon but only 250 MW from Luzon to the Visayas.

Power from Mindanao enters the Visayas through the Mindanao-Cebu HVDC interconnection, which is limited to 450 MW in both directions.

Descanzo said the lower-cost electricity generated in Luzon helped supply part of the Visayas’ demand through the Leyte-Luzon HVDC link and the 230-kilovolt Leyte-Cebu transmission corridor.

However, heavy power transfers significantly increased loading on the Leyte-Cebu corridor, particularly along the Daanbantayan-Tabango Lines 1 and 2, which have transmission capacities of 200 MW and 240 MW, respectively.

As a result, congestion along this corridor became a major operational constraint.

Descanzo said that whenever the corridor approached its operating limits, operators had to reduce Luzon-to-Visayas power transfers to maintain system security, preventing the Visayas from fully accessing lower-priced electricity available in Luzon.

Consequently, the Visayas had to dispatch more expensive local oil-fired generating plants during periods of tight supply.

This contributed to higher wholesale electricity prices and a widening price gap between the Luzon and Visayas electricity markets in the second quarter of 2026.

Descanzo further noted that these transmission constraints coincided with major generation outages, further tightening available supply and increasing market prices across the region.