Meralco seeks ‘sound’ policies to cut power costs

MANILA Electric Co. (Meralco) has called on the incoming government leaders to lay down policies that will address the rising cost of electricity, and to diversify the country’s fuel sources to ensure energy security and affordability.

“Fuel prices, as we know, mostly reflect the global oil prices as even our own Malampaya natural gas is indexed to oil,” Ray C. Espinosa, Meralco president and chief executive officer, told stockholders during their annual meeting held virtually on Tuesday.

“What we need are sound government policies that can address the movement of fuel prices and forex, and an environment that encourages the development and investment of additional capacities brought about by new generating plants,” he added.

His statement is in response to a question from a stockholder who asked whether it is possible to reduce the cost of electricity during the term of the next administration.

“Reducing electricity prices is always possible but involves looking into many factors that affect the movement of electricity rates. The biggest and most volatile part of the [electricity] bill, which is the generation charge, is driven by fuel prices, forex, and demand-supply situation,” he said.

Mr. Espinosa said Luzon, where the company’s franchise area is based, appears “on paper” to have enough new capacity coming online in the next three years to meet increasing demand and reserve requirements.

As basis, he used data from the Department of Energy (DoE) on “committed” power plants, or those that were able to secure financing, for the years 2022 to 2026.

The DoE projects power demand in Luzon’s electricity grid to increase by about 800 megawatts (MW) per year from 2022 up to 2026 as called for under the 2020 to 2040 Philippine Energy Plan.

“To meet this, around 7,198 MW of new capacity is scheduled to come online in the Luzon grid from 2022 to 2026 based on the DoE’s list of committed power plants as of Dec. 31, 2021,” Mr. Espinosa said, adding that the figure includes the 1,800-MW base-load capacity that Meralco bid out to suppliers last year.

He also said Meralco is looking to secure 850 MW of renewable energy-based mid-merit supply, which he said was initially proposed to be met by a hybrid plant consisting of solar and battery energy storage.

Mid-merit power is supplied by plants to fill in the gap between power coming from peaking plants, which are switched on when demand peaks, and base-load plants, which are continuously operated.

“With the recent surges in energy prices, the diversity of fuel sources is important for both energy security and affordability,” Mr. Espinosa said.

Meralco, along with its affiliates and subsidiaries under the “One Meralco” group, aspires to shift to clean energy, including abandoning the use of coal in the coming years.

Its power generation units Meralco PowerGen Corp. (MGen) and Global Business Power Corp. (GBP) plan to transition to a low-carbon future, starting with a solar power plant in Bulacan that became operational last year at a 55-MW alternating current capacity.

“Three additional solar plants are currently under development and expected to commence commercial operations in the latter part of 2022 and up to early 2023,” Mr. Espinosa said.

“The target is to build 1,500 MW of renewable energy capacity in seven years. And MGen-GBP aims to be coal-free by 2050 as next generation clean [technologies] mature technically and economically,” he added.

Meralco’s power generation business ended 2021 with a capacity of 2,251 MW and contributed P1.2 billion to the company’s consolidated core net income, or more than three times more than 2020’s P428 million.

Last year, Meralco’s core net income rose 13% to P24.6 billion, while reported net income, which factored in one-off adjustments, climbed 44% to P23.5 billion. The increase was driven by higher electricity sales volumes and by the contribution of its power generation business.

Asked by another stockholder on Meralco’s stand on nuclear energy as power source, he said: “Meralco will favorably consider contracting reasonably and competitively priced supply from generation companies including the BNPP (Bataan Nuclear Power Plant) if the same should become operational.”

“However, Meralco may not have the internal competencies to operate and maintain the BNPP,” he said, responding to a question on whether the company can take the lead.

On Tuesday, shares in the company rose 0.32% or P1.20 to close at P373.20 apiece at the stock exchange.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc.

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