Metro Manila (CNN Philippines, December 6) — San Miguel Corporation (SMC) is ending its Ilijan power supply deal with the Manila Electric Co., or Meralco.
In a statement on Tuesday, SMC’s power arm San Miguel Global Power (SMGP) said it already informed Meralco about the termination of the power supply agreement (PSA) effective Dec. 7.
This follows the Energy Regulatory Commission’s (ERC) rejection of both firms’ petition for a temporary hike in rates as a form of relief.
“From the very start, we were very transparent and clear with the ERC: We were not asking for a permanent increase, we did not want to be relieved of our contractual commitments, we were just asking for temporary, equitable relief, given the undeniable and unforeseen circumstances that affect not just us, but all Filipinos and many economies worldwide,” SMC President Ramon Ang said.
“Unfortunately, despite being shown that granting our petition would have been the cheapest option for consumers, the ERC still denied our petition, fully-aware that this would force us to either continue absorbing significant losses–which no company can sustain–or terminate the PSAs, which would ultimately lead to higher electricity costs for consumers: much, much higher than what we were asking for,” Ang added.
The 2019 deal involves 670 megawatts (MW) of electricity from the 1,200-MW Ilijan natural gas plant, which is run by South Premiere Power Corp. (SPPC), a subsidiary of SMGP.
SMGP earlier offered Meralco full use of its Ilijan power plant at a minimal tariff to stabilize power supply and keep energy prices as low as possible for consumers.
On Wednesday, Meralco confirmed it has received the notice of cessation of the supply deal.
It said it is currently sourcing the supply covered by the PSA from the wholesale electricity spot market (WESM), but added it is negotiating with other power generation firms to secure the 670 MW supply and shield customers against “volatile and potentially higher WESM prices.”
“Our priority is to ensure continuity of stable, reliable, and adequate supply for all our customers,” its statement read. “We are exhausting all efforts to mitigate any impact of these developments on our customers’ electric bills.”
The ERC said records of its billings for November showed that the 670-MW power supply agreement accounted for 13.4% of Meralco’s supply, with a ₱4.245 per-kilowatt-hour (kWh) price. It noted that the average WESM price for the same period was ₱8.47/kWh.
The commission also said as of Wednesday noon, it has not received any official communication from Meralco regarding SMC’s decision.
“It is not yet clear to us at this point if SPPC served a notice of PSA termination or merely a suspension of supply considering that the case before the Court of Appeals filed by SPPC involving the said PSA is still for final resolution,” it said in a statement.
The ERC added that it awaits action by the Office of the Solicitor General “after the matter was referred for undertaking the appropriate legal remedy.”
The commission also said the cessation of supply from a PSA does not excuse Meralco from its obligation under the law to supply electricity to its customers at the lowest cost.
Meralco, for its part, said it is still uncertain if the latest development will lead to an increase in customers’ bills next month. It explained it still has to check some factors, including the movement of prices of supply in the WESM over the next two weeks.
