The Classy Investor

  /  Editor's Pick   /  Meralco to start sourcing 670 MW from spot market

Meralco to start sourcing 670 MW from spot market

ABOITIZ Power Corp. (AboitizPower) will no longer supply power to electricity distributor Manila Electric Co. (Meralco) as their emergency power supply agreement (EPSA) ended on Wednesday.

“We confirm the end of our 30-day emergency power supply agreement with Meralco which takes effect today, Jan. 25,” AboitizPower said in a statement.

Separately, Meralco said that starting Thursday, it would source its requirement of about 670 megawatts (MW) from the Wholesale Electricity Spot Market (WESM).

The capacity is supposed to be covered by its power supply agreement (PSA) with South Premiere Power Corp. (SPPC), but this was subjected to a temporary restraining order (TRO) issued by the Court of Appeals (CA).

“Meralco is closely working with the Department of Energy and all relevant industry players to ensure adequate supply and protect its customers from volatile and higher WESM prices, which is especially crucial with the scheduled shutdown of the Malampaya natural gas facility next month and the anticipated increase in demand during the summer months,” the company said.

The Malampaya gas field is expected to go under a maintenance shutdown from Feb. 4 to 18.

In December, Meralco secured a 300-MW EPSA with a unit of AboitizPower to partly replace the capacity that SPPC, a unit of SMC Global Power Holdings Corp., stopped supplying.

Meralco’s EPSA with AboitizPower is effective from Dec. 15, 2022 until Jan. 25, 2023 for a rate of P5.96 per kilowatt-hour (kWh). The power was sourced from AboitizPower’s GNPower Dinginin Ltd. Co.

Meralco sought the EPSA after SPPC, the administrator of the natural gas-fired power plant in Ilijan, Batangas, stopped supplying power to Meralco effective Dec. 7 last year.

SPPC’s PSA with Meralco was agreed upon in 2019 for a period of 10 years. It covers about 670 MW of capacity and is priced at only P4.2455 per kWh.

Last year, SMC Global Power sought a temporary rate increase, jointly filed with Meralco, saying that SPPC and another unit San Miguel Energy Corp. (SMEC) incurred a combined loss of P15 billion. The rate increase was meant to recover part or P5 billion of the units’ losses.

The company cited a “change in circumstance” when surging fuel costs breached the price range contemplated during the execution of the contracts with Meralco. However, the Energy Regulatory Commission (ERC) denied the petition, saying it had no basis as their PSA is a fixed-rate contract.

SPPC’s parent firm SMC Global Power then sought the TRO to halt the implementation of the PSA between SPPC and Meralco. The CA issued the order on Nov. 23, 2022, and will be effective for 60 days.

On Wednesday, ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta said in a Viber message to BusinessWorld that the CA agreed to extend the effectivity of the TRO until the end of this month.

“The Court of Appeals conducted a hearing about two weeks ago on the SPPC petition for writ of preliminary injunction basically, an extended TRO,” she said. “I believe [the extension is] until the end of the month.”

Ms. Dimalanta added that the effect of the Aboitiz-Meralco EPSA was yet to be seen. “[W]e have no basis yet to ascertain rate impact from it or its expiration.”

The impact of sourcing more power from WESM, which is volatile and typically costs more, was seen in the January power bill of consumers.

Meralco announced earlier this month that it will increase the overall rate due to an increase in the power generation charge and the completion of refunds to consumers.

Meralco has assured its customers that it will again exhaust all measures to continue supplying “stable and reliable electricity at the least cost under the current circumstances.”

Meralco said that it requested AboitizPower to extend the term of its ESPA.

“We remain grateful for the opportunity to contribute to the delivery of a much-needed energy supply covering the Meralco franchise. In the event that Meralco launches another competitive selection process (CSP), where the terms of reference will be reasonable, AboitizPower will certainly participate,” AboitizPower said.

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 an interest in BusinessWorld through the Philippine Star Group, which it controls. — Ashley Erika O. Jose