Meralco vows to save PSAs with SMC power units

MANILA, Philippines — The Manila Electric Co. (Meralco) is trying to prevent the termination of its power supply agreements with San Miguel Corp. (SMC)’s power units following the denial by the Energy Regulatory Commission (ERC) of their joint petition for a temporary rate hike.

“We have read the decision denying the claim for price adjustment of SMC. For Meralco, we shall comply with the decision and we shall exert all available remedies to prevent the termination of the power supply agreements with South Premiere Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC),” Meralco first vice president and head of regulatory management Jose Ronald Valles said in a statement yesterday.

Valles, however, said that in the event that SPPC and SMEC would be unable to actually deliver power to Meralco for whatever reason, the power distributor is constrained to source up to 1,000 megawatts from the Wholesale Electricity Spot Market (WESM) “without prejudice to the resolution of whatever legal remedies Meralco may pursue against SPPC/SMEC under the power supply agreement (PSA).”

Meralco and SMC Global Power Holdings Corp. previously warned of higher rates for customers if their joint petition for temporary rate hike is rejected.

SPPC and SMEC, administrators of the Ilijan and Sual plants, respectively, had earlier issued notices of termination to Meralco of their PSAs effective Oct. 4, citing unexpected and unprecedented “change in circumstance,” including skyrocketing global fuel prices brought about by multiple factors such as the Russian invasion of Ukraine.

Valles said Meralco has also sought offers and entered into emergency power supply agreements (EPSAs) with other generation companies to ensure continuity of stable, reliable and adequate supply to Meralco customers, in case the termination of the PSAs with SMC pushes through.

“We are hoping for the swift action of the Department of Energy in exempting the EPSAs from undergoing competitive selection process,” Valles said.

“Without these EPSAs, our customers may become exposed to volatile prices,” he said.

The ERC said that there are still available remedies for Meralco to pursue under the PSAs, consistent with its continuing duty to ensure supply of electricity in the least cost manner to its captive market.

“The role of the regulator is always a balancing act. The Commission deliberated on many occasions on these joint motions fully conscious that the consequences of the ruling go beyond the businesses of the immediate parties (Meralco, SPPC and SMEC), but will extend further and demonstrate how we, in the Philippine power industry, honor the sanctity of contracts, uphold the results of bidding process, and hold ourselves accountable to all stakeholders,” ERC chairperson Monalisa Dimalanta said.

“We were mindful as well of the limits of regulation. As we protect consumer interests, our rulings cannot be oppressive to business. We tried, as we ruled on these joint motions, to decide on the basis of the clear terms of the PSAs that the parties signed up for, and on the basis of law,” she said.

The DOE, for its part, expressed confidence that San Miguel Power and Meralco would be guided accordingly by the ERC order and insure uninterrupted power supply, notwithstanding the denial of their joint petition.

The agency said it respects the independence, responsibility and authority of the ERC to hear and resolve cases brought before it consistent with its charter.