SMC Global Power Holdings Corp. (SMCGP) yesterday said power rates in Metro Manila and nearby provinces may go up by as much as 30 percent starting October if the Energy Regulatory Commission (ERC) do not approve a joint petition with the Manila Electric Co. (Meralco) for a temporary rate hike on its two power supply agreements (PSA).
SMCGP said if granted, the temporary relief would increase electricity prices in Luzon by only 30 centavos per kilowatt hour (kWh) over a period of six months. Without it and with a termination of the PSAs, Meralco said the increase would be anywhere from 80 centavos to P1.30 per kWh over the next three to four months, as the power distributor will have to find alternative sources that will most likely be costlier, including the Wholesale Electricity Spot Market.
The company said if Meralco opts for emergency power supply procurement, the increase will even be higher due to a weak peso and high global fuel and coal prices.
The company also expects hefty price increases over the term of the contracts until 2030 if the temporary relief intended for partial cost recovery is not approved.
Ramon Ang, SMCGP president, has asked ERC for a “fair and objective assessment” of the petition, which the company filed in May. The company is seeking for a temporary increase for six months for the combined capacities supplied by its Sual coal plant and Ilijan natural gas plant to Meralco, following the record rise in global fuel prices.
Ang said the temporary rate hike is meant to allow the facilities to not only recover some P5 billion in losses but to also ensure the fixed-rate PSAs are maintained over the longer term.
Ang said the company’s current PSAs help keep electricity low for consumers as they are among the last of the fixed-rate PSAs that do not pass on any additional costs to consumers.
“We know any price increase is unpopular, and normally we never ask for one — which is what we did for all of last year, when we absorbed expanding costs that we do not pass on to consumers. The war in Ukraine has taken prices far beyond what we and Meralco, could have even imagined in 2019, when we signed the PSAs. At the time, the forecast for coal was only $65 per MT for 10 years. Now it is at $400 per MT,” Ang said.
Ang said South Premiere Power Corp. and San Miguel Energy Corp., administrators of the Ilijan and Sual plants, respectively, have issued Meralco notices of termination of their PSAs , citing unexpected and unprecedented change in circumstance, including surge in global fuel prices brought on by multiple factors including the war.
SMCGP said the termination of PSAs with Meralco will take effect October 4, if no relief is given.
“These power plants account for 25 percent of the net reliable capacity of the Luzon grid. They are a major part of the country’s already fragile power supply. We ask that in this time of extraordinary circumstance and difficulty, please, let’s not cripple them,” Ang said. Jed Macapagal