Higher power rates seen on ceased 670-MW supply

MANILA ELECTRIC Co. (Meralco) is negotiating with power generation companies to source 670 megawatts (MW) that a unit of San Miguel Global Power Holdings Corp. stopped supplying in a move that could raise electricity rates starting in January.

The Energy Regulatory Commission (ERC), however, was left out of the discussion as it claims to have not been informed by the power distributor of the reported cessation of supply.

Joe R. Zaldarriaga, Meralco spokesperson and head of corporate communications, confirmed on Wednesday that San Miguel Global Power subsidiary South Premiere Power Corp. (SPPC) had terminated their power supply contract.

“We are confirming the receipt of the notice of cessation of SMC Global Power’s supply. This covers 670 MW of our power supply agreement (PSA) with [SPPC],” Mr. Zaldarriaga said.

On Tuesday, SMC Global Power said in a statement that it was terminating SPPC’s PSA with Meralco effective Dec. 7.

“Unfortunately, despite being shown that granting our petition would have been the cheapest option for consumers, the ERC still denied our petition,” SMC Global Power President and Chief Executive Officer Ramon S. Ang said.

Mr. Zaldarriaga said that Meralco is now sourcing power from the Wholesale Electricity Spot Market (WESM), while negotiating with generation companies to secure power supply.

“Our priority is to ensure continuity of stable and reliable power supply, we are exhausting all efforts to mitigate any impact of these recent developments,” he said.

Meralco Vice-President and Head of Utility Economics Lawrence S. Fernandez said that SPPC’s power supply covers about 12% of Meralco’s supply last month.

“The spot market prices based on the IEMOP’s report from Monday and Tuesday, they ranged from P7 to P9 per kilowatt-hour (kWh) compared to SPPC’s P4 per kWH,” Mr. Fernandez said, referring to Independent Electricity Market Operator of the Philippines.

“We still need to see the other factors that will come into play. To assume higher bills for customers, well in terms of the bills of the customers, that is a possibility, but still remains to be seen,” Mr. Zaldarriaga said.

Last month, the Court of Appeals (CA) issued a temporary restraining order (TRO) in favor of SMC Global Power, suspending the implementation of SPPC’s PSA with Meralco.

The 60-day TRO was sought by the company after the ERC denied a joint petition for a rate increase filed by SMC Global Power and Meralco. The rate increase was meant to partially recover the losses incurred by SMC Global Power units SPPC and San Miguel Energy Corp. (SMEC), the administrators of the natural gas-fired power plant in Ilijan, Batangas, and the coal power plant in Sual, Pangasinan, respectively.

SMC Global Power is seeking to recover losses amounting to P5 billion while absorbing P10 billion. It claims to have lost P15 billion because of extraordinary circumstances, including soaring fuel costs, which were way higher than when its units forged the PSAs.

Meanwhile, the ERC said on Wednesday that it has yet to receive an official notice from Meralco on the cessation of SPPC’s supply.

“It is not yet clear to us at this point, if SPPC served a notice of PSA termination or merely a suspension of supply considering that the case before the CA filed by SPPC involving the said PSA is still for final resolution,” ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta said.

The ERC said it is also waiting for the guidance of the Office of the Solicitor General for its next step, “after the matter was referred for undertaking the appropriate legal remedy.”

It said that based on ERC records of Meralco billings for November 2022, the 670-MW contract with SPPC accounted for 13.4% of the utility’s supply and was priced at P4.2455 per kWh. It said the average WESM price for the same period was P8.47 per kWh.

The regulator said the cessation of supply from a bilateral contract or PSA does not excuse the distribution utility from its obligation under Section 23 of Republic Act No. 9136 or the Electric Power Industry Reform Act (EPIRA) of 2001 “to supply electricity in the least cost manner to its captive market…”

On Monday, Meralco said it had secured a certificate from the Department of Energy (DoE) exempting the 670-MW emergency power supply agreement from going through a competitive selection process.

Jose Ronald V. Valles, Meralco’s first vice-president and head of its regulatory management, said on Monday that so far, the company had negotiated with Aboitiz Power Corp., which only offered 300 MW capacity and only for a period of two months until Jan. 25.

Mr. Zaldarriaga said that despite SMC Global Power’s move to terminate its PSA, the power distributor is still considering the offer of SMC Global Power’s 1,200-MW capacity of its Ilijan plant.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Ashley Erika O. Jose