The Energy Regulatory Commission (ERC) is looking at the merits of a joint filing for temporary price adjustments in relation to power supply agreements (PSAs) in 2019 between San Miguel Corp.’s (SMC) power generation companies and the Manila Electric Co. (Meralco).
If approved, the request may result to temporary additional power charges for Meralco customers.
“SMC claims it is incurring huge losses due to the continued increase of fuel prices at unprecedented levels. SMC wants to recover actual fuel cost without any margin. We are concerned that the continued implementation of our PSAs will be affected once SMC suffers huge losses which could force it to stop delivering power to our customers,” said Jose Ronald Valles, Meralco head of regulatory management, in a statement.
“…If SMC decides to terminate our PSAs, our customers will inevitably suffer. Our PSAs provide any such claim will need regulatory approval. Hence, we have elevated the matter to ERC for their evaluation and consideration,” Valles added.
Last week, the ERC said that the matter is not yet “ripe for decision” as the regulatory body is also verifying what will be “equitable” for the entire energy value chain.
In 2019, Meralco conducted a competitive selection process wherein San Miguel Energy Corp. (SMEC) secured a deal to supply the distributor with 330 megawatts (MW) worth of electricity at all-in headline rate of P4.6314 per kilowatt hour (kWh) while South Premiere Power Corp. (SPPC) joined for 670 MW at an all-in headline rate of P4.6314 per kWh.
Both contracts are for baseload supply of electricity or power that is needed 24×7 and was made effective Dec. 26, 2019 for a term of 10 years.
SMEC is supplying the power from the 1,000 MW Sual coal power plant in Pangasinan while SPPC electricity is from the 1,200 MW Ilijan natural gas-fired power plant in Batangas.
Since 2019, commodity fuel prices have continued to increase at unprecedented levels.
Likewise, the Ilijan plant experienced unexpected deration in its capacity as a result of gas restrictions from the Malampaya gas field which forced SPPC to source its supply for Meralco from the wholesale electricity spot market wherein current average prices are also elevated.
In December 2019, average prices of coal based on the Newcastle coal futures was at $67.70 per metric ton (MT) and has since surged by over 500 percent to an average of $413.75 per MT in July 2022.
