Consistent application sought for key ERC ruling

AC Energy’s call comes ahead of decision on joint SMC-Meralco rate hike petition

ACEN Corp. has joined participants in the energy sector that have called on the regulator to decide on a joint plea by the country’s dominant power distributor and its energy supplier to hike their previously approved electricity rate to reflect unforeseen events.

The call from the Ayala-led renewable energy platform came days after the Energy Regulatory Commission (ERC) heard the petition jointly filed by Manila Electric Co. (Meralco) and a unit of San Miguel Corp. (SMC).

“Whatever the decision will be, we hope that our regulator as well as Meralco, will treat all suppliers fairly and consistently,” ACEN President and Chief Executive Officer Eric T. Francia said in a statement sent via Viber.

“We have the same contract and similar set of circumstances, so if there is a change in circumstance in one supplier, the same should apply to others,” he added.

The change in circumstance was previously described by SMC President Ramon S. Ang as extraordinary and unprecedented, caused by commodity supply disruptions brought about by Indonesia’s coal export ban, Russia’s war on Ukraine, and the pandemic’s value chain issues.

Mr. Ang said that SMC’s power unit SMC Global Power Holdings Corp.’s power facilities in Sual, Pangasinan and Ilijan, Batangas had incurred a combined loss of P15 billion, prompting the group to seek temporary relief to allow it to continue supplying power.

SMC decided to absorb more than P10 billion of the losses, which were incurred last year and traced to a surge in the average coal price to $176 per metric ton (MT) in the second half of last year from just $99 per MT in the first half. It said the average coal price in 2019 and 2020 was only at $69 per MT. The Sual plant runs on coal.

The company also cited the unilateral natural gas supply restrictions from Malampaya for the Ilijan power plant.

SMC earlier said that coal prices in the global commodities markets had breached $400 per MT or way above the $60-$65 per MT price range that was factored in during the execution of its power supply agreements (PSA) with Meralco in 2019.

SMC Global Power is seeking temporary and partial cost recovery relief only for the losses it incurred from January to May 2022 through a rate increase on its contract capacity under the PSAs to be amortized over a period of six months.

Up for ERC resolution is the joint petition for a rate increase covering the first five months of this year of P0.80 per kilowatt-hour (kWh) from P4.3-P5.1 per kWh for the SMC group’s 670 megawatts (MW) of contracted baseload capacity from the Ilijan plant, and an average of P4 per kWh from P4.3-P8.3 per kWh for the 330-MW contracted baseload capacity from the Sual plant.

SMC is looking to recover from P5.2 billion in losses for the five-month period.

ACEN did not give details on its PSA with Meralco but based on ERC documents, the company under its previous name was issued a notice of award by Meralco after a competitive selection process (CSP) for its bid to supply 200 MW at P4.8849 per kWh.

In a media statement on Aug. 23, Mr. Ang called on the ERC for a fair and objective assessment of the joint petition, which was filed in May, seeking a temporary rate increase for six months.

He also said that the administrators of the Ilijan and Sual plants had issued notices of termination to Meralco of their PSAs, citing unexpected and unprecedented “change in circumstance.” He added that the termination is effective starting Oct. 4, if relief is not given.

Consumer groups such as Kuryente.org challenged the ERC to decide on the joint petition. In a statement last month, it said that if a company cannot respect its contractual obligations and the CSP, “it must close shop and allow those who could deliver these obligations as it does not have any moral ascendancy in staying in the industry.”

Separately, Greenpeace called on the ERC last month to “remain firm in prioritizing the welfare of consumers, by ensuring that electricity prices will not drastically increase to compensate for companies’ dirty, destructive, and expensive energy generation.”

On Aug. 30, the ERC held a hearing attended by the joint petitioners. It has yet to decide on the matter. — Victor V. Saulon