Regulator OKs Meralco supply deal with San Miguel unit
CHEAPER ELECTRICITY Customers of Meralco can expect to pay lower bills with the utility’s supply deal with South Premier Power Corp. —Niño Jesus Orbeta
MANILA, Philippines — The Energy Regulatory Commission (ERC) has approved in principle the supply deal between power distributor Manila Electric Co. (Meralco) and a subsidiary of listed conglomerate San Miguel Corp.
The regulator granted provisional approval to the power supply agreement (PSA) between Meralco and SMC unit South Premier Power Corp. (SPPC) involving 910 megawatts to cushion the blow of volatile electricity prices on Meralco consumers.
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The supply deal has a base rate of P5.9282 a kilowatt-hour and will be sourced from the 1,200-MW natural gas-fired power plant of SPPC in Ilijan, Batangas.
The ERC said the issuance of a provisional approval “will further protect Meralco’s consumers from exposure to volatile prices in the Wholesale Electricity Spot Market (WESM) and displace volumes contracted by Meralco also from the Ilijan plant at higher prices.”
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Meralco’s generation rate will decrease by about P0.2828 a kWh based on the agency’s simulations, subject to adjustment after the approval of the final supply agreement.
Article continues after this advertisementIn its evaluation, the ERC noted that Meralco awarded only 890 MW of the 1,200-MW capacity under the PSA to SPPC since about 290 MW from the Ilijan power facility was already contracted under a previous deal and was priced lower at P5.1363 a kWh.
Savings
“Thus, the commission ordered the parties to continue honoring the subsisting contract and lower rate in respect of the 290-MW capacity,” it said.
Meralco and SPPC were also ordered to submit proof of compliance under the competitive bidding’s terms of reference from Dec. 26, 2023, and that for the duration of the PSA, “no capacity and electrical output within the contract capacity shall be contracted under an agreement apart from the resulting PSA of this bidding.”
Early in March, Meralco and SPPC filed a joint application for their PSA after San Miguel’s power entity clinched a contract to supply Meralco’s requirements through a competitive selection process.
The two companies claimed that the approval of the PSA would result in savings to consumers of about P15.337 billion.
They said that without such an agreement, Meralco customers “will be exposed to the volatile prices of the WESM in the considerable volume of the subject 2024 Meralco-SPPC PSA, which is crucial at the start of the summer season of 2024.”
Meralco held bidding for this particular 1,200-MW supply as it anticipated a capacity deficit in its portfolio that it would be forced to buy in the WESM if it did not have any supply agreement.
