The Department of Energy (DOE) expects Manila Electric Co. (Meralco) and San Miguel Corp. (SMC) will continue to provide uninterrupted power supply despite the Energy Regulatory Commission’s (ERC) decision denying the parties’ joint petition for temporary price adjustments in relation to power supply agreements (PSAs) in 2019.
Meanwhile, some groups hailed the decision claiming as a “victory” for consumers.
“The DOE respects the independence, responsibility and authority of the ERC to hear and resolve cases brought before it consistent with its charter, the Electric Power Industry Reform Act. The Department is highly confident that as responsible corporate citizens and business entities imbued with public interest, San Miguel and Meralco will be guided accordingly by the ERC order and insure uninterrupted power supply to our people and the country, notwithstanding the denial of their joint petition,” the DOE said in a statement yesterday.
The ERC denied the joint motions through a majority vote of three commissioners and two other commissioners with dissenting votes in a decision dated September 29 and released Monday night.
SMC and Meralco earlier said the price adjustments will help avert the possibility of power rates in Metro Manila and nearby provinces going up by as much as 30 percent starting this month.
SMC had said the temporary relief would increase electricity prices in Luzon by only 30 centavos per kilowatt hour (kWh) over a period of six months. It said without the increase and the termination of PSAs will lead to an estimated increase of at least 80 centavos up to P1.30 per kWh in the price of electricity over the next three to four months, as Meralco will have to find alternative sources that will most likely be costlier, including the Wholesale Electricity Spot Market (WESM).
SMC wants a temporary rate adjustment in view of the record rise in global fuel prices affecting the cost to run the Sual coal plant and Ilijan natural gas plant.
SMC had warned if Meralco opts for emergency power supply procurement, the increase in electricity prices would be higher with the weakening peso and surging global fuel prices.
The ERC said PSAs are financial contracts that specifically allow SMC through its subsidiaries to supply Meralco from sources other than their identified power plants which could both be priced higher or lower than the current sources.
The ERC added the fixed price nature of the 10-year PSAs are “precisely intended to act as a natural barrier protecting Meralco consumers from external threats, such as market volatilities.”
The ERC also noted that apart from termination, there are still available remedies for Meralco to pursue under the PSAs, adding that the parties’ projected cost impact were based on forecasted figures whereas the regulatory body used actual figures.
ERC chair Monalisa Dimalanta said in a briefing yesterday if the parties are really to terminate the PSAs, they are still bound to follow the period prescribed in the contracts.
Dimalanta said the termination can only occur whether 60 days from the denial of their motions for price adjustment or through a six months prior notice that are provided under the PSAs.
Jose Ronald Valles, Meralco first vice president and head of regulatory management, said they will comply with the ERC decision but will exert all available remedies to prevent termination of the PSAs with SMC subsidiaries.
“However, in the event that South Premiere Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC) will be unable to actually deliver power to Meralco for whatever reason, we are constrained to source up to 1,000 megawatts from WESM without prejudice to the resolution of whatever legal remedies Meralco may pursue against SPPC/SMEC under the PSA,” Valles said in a statement.
Meralco said it also sought offers and entered into emergency power supply agreements (EPSAs) with other generation companies to ensure continuity of stable, reliable and adequate supply to customers.
The company expressed hope the DOE will exempt the EPSAs from undergoing competitive selection process as without such procurements, customers “may become exposed to volatile prices.”
The Power for People Coalition (P4P) called the ERC’s decision as something “historic.”
“The ERC’s recent history has made consumers pessimistic about the willingness of the agency to defend consumer rights. We are glad to have been proven wrong in this case. The vigilance and solidarity with which consumers resisted this threat of higher electricity rates bore fruit with this ERC decision and we hope this is the start of more pro-consumer outcomes in years to come,” said P4P convenor Gerry Arances, in a statement.
The Institute for Climate and Sustainable Cities (ICSC) in a separate statement said future PSAs should also abolish automatic fuel cost pass-through provisions.
“Power companies dominating the market — especially those which continue to rely on imported, expensive and unreliable coal and those whose power plants are persistently on prolonged outages and intermittent operations should be slapped with commensurate penalties that would alleviate price hikes and cushion their impacts on consumers…,” said Renato Redentor Constantino, ICSC executive director.
