DOE seeks Meralco pricing justification on emergency PSA

The Department of Energy (DOE) has notified Manila Electric Company (Meralco) for the utility firm to explain the ‘pricing justification’ of its interim power supply agreement (IPSA) for up to 260-megawatt emergency procurement of power capacity from the Masinloc coal-fired plant.

According to DOE Director Mario C. Marasigan, the power firm will “have to explain and clarify the basis of its pricing vis-à-vis if it will have to exposed via the WESM (Wholesale Electricity Spot Market).”

He qualified that an official correspondence was already sent to Meralco on that, and the agency is just waiting for the company’s reply before the DOE will continue with its evaluation for the IPSA to be exempted from the competitive selection process (CSP), a policy requirement on underwriting power supply agreements.

“It’s being acted by the DOE and the latest communication we have issued with Meralco is they have to explain... if the request is justifiable, that we have yet to determine,” the energy official stressed.

The propounded emergency supply procurement of Meralco targets to shore up its supply by additional 220 to 260MW – and that will be via the IPSA that it inked with Masinloc Power Partners Co. Ltd. (MPPCL) of the San Miguel group.

Given tight supply conditions in Luzon grid that may last until August this year, the power firm emphasized that it will need to resort to urgent procurement of supplemental capacity to save power consumers from unwanted brownouts, hence, it is proposing that such must be spared from the CSP exercise.

The interim supply deal with MPPCL serves as an extension of the utility firm’s power contract with the San Miguel subsidiary that was first sealed in 2019 and will be falling due this year.

As stated by Meralco, the price of the PSA will be significantly lower at P6.9161 per kilowatt hour (kWh) compared to the cost in their original PSA which had been at P11.0022 per kWh.

The utility firm further noted the PSA price would be substantially lower compared to the previous peaking rates that the company had signed up with other power suppliers.

Under the supply pact with MPPCL, it is also the generation company that will shoulder the procurement of replacement power, in case its power generating facility will suffer unforeseen outages.

The CSP prescribes a bidding process that power distribution firms, like Meralco, would have to comply with before they can purchase supply to form part of their portfolio that will be delivered to customers.

Under the rules, certain developments in the power system, including required emergency procurements of power capacity, can be exempted from going through CSP activity, but this will need prior approval from the energy department.