Meralco to oppose termination of PSA with SMC

MANILA, Philippines — The Manila Electric Co. (Meralco) plans to oppose termination of its power supply deals with SMC Global Power should the San Miguel Corp. power subsidiary decide to do so.

“If San Miguel will pursue termination of the two contracts, then we have to await a notice of termination from them and once we receive that notice of termination from San Miguel, we will immediately manifest to the Energy Regulatory Commission (ERC) our opposition to the termination and request guidance from the ERC to resolve the matter,”Meralco head of regulatory management Jose Ronald Valles said.

So far, however, SMC Global Power has not terminated its contract with Meralco despite the ERC’s earlier decision rejecting their joint motions for price adjustments.

The price adjustments was supposed to serve as temporary relief covering a combined P5.2 billion losses incurred by South Premiere Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC) from January to May 2022 due to the unprecedented spike in fuel prices.

Last Oct. 5, SPPC and SMEC sent notices to Meralco stating that they would continue to supply at the rates provided under the power supply agreements (PSAs) executed in 2019, albeit under protest.

As ordered by the ERC, termination of the PSAs could only take place after 60 days from the receipt of the ERC orders and Meralco should exhaust all remedies under the contracts to preserve them and ensure the least-cost supply for its customers.

“In light of the decision of the ERC with respect to the San Miguel contracts, we have decided to request the DOE to put on hold the evaluation of the request (for exemption) because San Miguel has written us a letter signifying its intent to continue supplying power to Meralco under protest without prejudice to the available remedies that they may undertake,” Valles said.

Meralco has earlier filed an application to exempt its emergency power supply agreements with generation companies from undergoing competitive selection process in preparation should SMC decide to push through with the termination of its PSAs.

“So, because they are now supplying power to Meralco continuously up to this time, there is no need for the EPSAs as of the moment,” Valles said.

The Meralco official, however, said the application is still pending with the DOE and it has not been withdrawn.

SMC earlier said the company continues to evaluate legal remedies to strengthen its claim for cost recovery, or possibly reverse the unfavorable ERC ruling, even as termination remains a recourse for the company, as affirmed even by the ERC in its decision and provided for in its PSAs with Meralco.

With a termination of the PSA, SMC said it could eventually dispatch the capacities originally covered by the PSAs to supply either the Wholesale Electricity Spot Market, Meralco for its emergency power requirements, or distribution utilities and electric cooperatives at prevailing market terms.

SMC also pointed out that there are no penalties associated with a possible termination, as this would be in accordance with the provisions of the PSA.