Meralco-PEDC power supply deal gets provisional approval

MANILA Electric Co. (Meralco) and Panay Energy Development Corp. (PEDC) have secured provisional regulatory approval for their power supply agreement for 70 megawatts (MW) to augment the electricity provider’s requirements for this year and the succeeding years.

In its order promulgated on July 27, 2022, the Energy Regulatory Commission (ERC) said it had verified the capacity covered in the agreement and found it “consistent” with Meralco’s 2022-2030 power supply procurement plan.

“Even with the 70 MW capacity procured by [Meralco], it still expects a power supply deficit equivalent to 792 MW in the year 2022. Thus, the procurement of new power supply through [a] bilateral contract in order to ensure continuous and reliable electricity for [its] customers is justified,” the regulator said.

It added that not addressing the deficit in a timely manner will expose the utility company’s consumers to the volatility of prices in the electricity spot market, which averaged at P5.21 per kilowatt-hour (kWh) in 2021.

The 15-year power supply agreement (PSA) had been forged after Meralco initiated a competitive selection process in which PEDC emerged as the winning bidder.

The provisional authority given to the contracting parties’ PSA is subject to conditions and modifications.

The application rates will be at P3.1079 per kWh at the minimum energy off-take at 75% plant capacity factor, and P2.3309 per kWh at 100% plant capacity factor, regardless of source.

The rates are subject to escalation as set in the applicants’ PSA. The commission has disallowed the renewal of the agreement.

“PEDC shall deliver the contracted capacity at all times, regardless of its source, subject to the rates and the terms as provisionally approved herein,” the ERC said.

It also said that in the event that the final rate is lower than that provisionally granted, the amount corresponding to the reduction will be refunded by PEDC to Meralco, which will credit the same to the electric bills of consumers.

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 interest in BusinessWorld through the Philippine Star Group, which it controls. — VVS