THE ENERGY Regulatory Commission (ERC) has approved the request of Manila Electric Co. (Meralco) and a unit of First Gen Corp. to continue procuring power supply from a 1,000-megawatt (MW) gas-fired power plant in Batangas until Jan. 31, 2026.
In an order dated Aug. 27, the ERC authorized the implementation of the interim extension of the power purchase agreement (PPA) between Meralco and First Gas Power Corp. (FGPC) for the dispatch from the latter’s Sta. Rita power plant.
The application was approved a day before the expiration of the PPA.
First Gen owns and operates four gas-fired power plants with a combined capacity of 2,017 MW located in Batangas. FGPC, a subsidiary of First Gas Holdings Corp., supplies electricity from the Sta. Rita plant to Meralco under a 25-year PPA.
The companies earlier filed a motion with the ERC to extend the PPA, as FGPC said it would likely be constrained to shut down the power plant due to loss of offtake.
Should the shutdown happen, they said this may further limit the availability of generation capacity and result in yellow/red alerts to the grid that will “inevitably impact Meralco’s customers.”
In its simulation, Meralco forecast that the interim extension of the PPA would result in an increase in blended generation costs of between P0.4117 per kilowatt-hour (kWh) and P0.5093 per kWh in the next three months.
The ERC also directed the Independent Electricity Market Operator of the Philippines (IEMOP), the operator of the Wholesale Electricity Spot Market (WESM), to simulate potential rate increases that would occur in the WESM if the Sta. Rita power plant, along with other natural gas plants, were to operate as merchant plants.
Based on IEMOP’s simulations, spot market prices could increase to as high as P6.23 per kWh with the Sta. Rita power plant operating as a merchant plant compared to operating with a PPA.
In its explanation, the ERC said that although the motion would affect Meralco’s generation charge, there are still “other equally compelling and urgent reasons that justify the proposed extension.”
“The rate consequences would be significantly more severe than the estimated increase in the generation charges calculated by Meralco for the affected months,” the ERC said.
In approving the extension, the ERC ordered that the dispatch of FGPC’s Sta. Rita plant should be at its minimum level only.
“Nevertheless, the Commission remains cognizant of the difficulties imposed on Meralco’s consumers in the pursuit of energy security for the entire power system,” the ERC said.
In exercising its rate-making authority, the regulator said it is compelled to approve a pass-through rate for the Sta. Rita plant’s supply to Meralco under the interim extension.
The rates are equivalent to the previously approved rates but based on an 83% plant capacity factor.
The ERC said that Meralco must manage its electricity purchases in a manner that ensures the least-cost supply to its captive market.
Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.
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