ERC OKs termination of SMC-Meralco PSA

Richmond Mercurio - The Philippine Star
ERC OKs termination of SMC-Meralco PSA
Meralco linemen check the electric meter base at a post along Barangay Commonwealth in Quezon City on May 9, 2023.
Jesse Bustos

MANILA, Philippines — The Energy Regulatory Commission (ERC) has approved the termination of two power supply deals between power companies owned by San Miguel Corp. and Manila Electric Co. (Meralco) totaling 1,800 megawatts (MW).

The ERC’s approval of the termination of the power supply agreements (PSA) will now allow Meralco to proceed with the conduct of a competitive selection process (CSP) for its supply requirements.

“We already granted their request for withdrawal of the application. That has been approved already,” ERC chairperson Monalisa Dimalanta said.

San Miguel Global Power back in March issued  notices of termination of its PSAs with Meralco covering 1,200 MW and 600 MW.

“Initially, they filed on the basis of the longstop date (of the PSAs) already lapsing. So we asked Meralco to demonstrate or explain, did you ask them to extend, at least fight for the customer? They (Meralco) said they did, twice,” Dimalanta said.

Meralco earlier said it is looking to rebid a 1,800-MW supply contract after San Miguel withdrew its supply deals aimed to provide electricity by 2024 and 2025.

This refers to the two 20-year supply contracts signed with San Miguel units Excellent Energy Resources Inc. and Masinloc Power Partners Co. Ltd. back in 2021.

Meralco first vice president and head of regulatory management Jose Ronald Valles earlier said the power distributor was just waiting for the ERC approval to proceed with the CSP for the 1,800-MW requirement of the company starting next year.

He said the terms of reference are ready for publication as soon as the company receives the ERC approval.

“For the 1,800 MW that was being supplied by Excellent Energy for 1,200 MW and 600 MW by Masinloc, both of these contracts have been terminated by San Miguel both on the lapse of the six-month period under the power supply agreement. They sent us a notice of termination and we are waiting for the ERC to act on the termination of these contracts because the ERC has advised us to await their approval of the termination,” Valles earlier said.

Dimalanta said Meralco would have to observe the new CSP guidelines issued by the commission on Oct. 6 should the company proceed with its planned CSP for the 1,800-MW capacity.

“The binding rules would be the set of rules at the time you filed. And since we have new ones, they have to comply,” she said.

The CSP guidelines govern power supply contracting of distribution utilities (DUs) for customers who are not yet able to procure their own supply.

CSP is the process wherein a power supplier is chosen to supply electric power requirements of a DU through transparent and competitive bidding, and is mandated by government to get the least cost power to consumers.

The ERC said the CSP guidelines marks a significant step toward ensuring transparency, accountability, and competitiveness in the supply of power in the least-cost manner to the DU’s captive market.

With the recent issuance by the ERC of the CSP guidelines, Sen. Win Gatchalian has called on the commission to approve on time the PSAs between DUs and generation companies to ensure a steady supply of electricity at affordable rates for the benefit of consumers.

“We’re hoping that strict implementation of the bidding guidelines would result in the timely approval by the ERC of PSAs and help DUs to procure supply at the least cost for the benefit of consumers,” Gatchalian said.

From 2003 to 2023, Gatchalian said there were a total of 527 pending PSAs before the ERC.

He said there are 16 pending PSAs before the commission this year, slightly lower from last year’s 18.

The Senator has also urged the ERC to immediately implement the provisions of the new power bidding guidelines to ensure compliance of DUs and active participation of consumer groups.

Gatchalian said the ERC should likewise encourage consumer groups to participate in the bidding through active monitoring, a privilege that was not previously afforded them.

He said this would help ensure transparency in the implementation of the CSP and enhance accountability in every PSAs.

“We need better accountability in the implementation of the PSAs, which means it is more difficult for generation companies to just walk away from the PSAs. This would help stabilize energy supply and eliminate surprises in terms of pricing,” Gatchalian said.

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