ERC okays extension of power supply deal between Meralco, 1590 Energy

MANILA, Philippines - The Energy Regulatory Commission (ERC) has approved the application filed by Manila Electric Co. (Meralco) seeking to extend its interim power supply agreement (IPSA) with 1590 Energy Corp., a power generation company.

Meralco and 1590 Energy signed in May a supply agreement for the power company’s 225-megawatt diesel-fired power plant in Bauang, La Union.  The ERC extended this to October 2014 and now, further to July 2015.

In its application, Meralco said there was a need to extend the agreement to July this year to address the looming power shortage in the summer, which, in turn may also extend through July given the scheduled and unplanned outages of some power plants.

Meralco said without an extension of the power supply agreement, Meralco may have to source additional power from the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity, which may be higher due to price volatility.

“There is a need for it to further extend the term of the IPSA to ensure the availability and affordability of the supply of electricity to its customers and to mitigate exposure to the WESM,” Meralco said in its application.

“There is a paramount necessity for the approval of the extension of the term of the IPSA in order to ensure continuous and reliable electricity for its customers,” the power distributor added.

To further support its application, Meralco said the simulated prices from January to July 2015 would result in an overall cost savings in its blended generation charge of P0.0922 per kilowatt-hour, equivalent to P1.6055 billion.

In granting its approval, the ERC aid it has found the motion for extension consistent with the Commission’s earlier decision issued on May 12, 2014.

“Accordingly, the term of the IPSA executed between Meralco and 1590 Energy is hereby extended until July 25, 2015, subject however, to the same conditions provided in the said decision,” the ERC said in a decision in December last year but published only yesterday.

There is a projected power supply deficiency this summer of 700 megawatts due to higher demand and lack of supply as a result of the one-month maintenance shutdown of the deep water gas-to-power Malampaya natural gas facility in offshore Palawan, which supplies roughly 40 percent of Luzon’s power requirements.