The Energy Regulatory Commission (ERC) will prudently examine the implication of the P0.30 per kilowatt-hour (kWh) rate hike plea of SMC Global Power Holdings Corporation (SMCGP) to the similarly-situated power supply agreements (PSAs) underwritten by the other power utilities.

The bid of San Miguel for temporary tariff increase is due to its swelling costs on fuel purchases to continuously run its Ilijan gas-fired and Sual coal-fired power facilities – wherein a significant fraction of their generated capacities are in long-term contracts with power utility giant Manila Electric Company.

“It would have serious implications, that is why we are evaluating this carefully,” ERC Chairperson Monalisa C. Dimalanta noted.

She expounded “we need certain clarifications not just on the CSP (competitive selection process) observed by Meralco but also on how the terms of the PSAs resulting from the CSP are being observed and implemented by the parties.”

The ERC has not fully accounted yet which other power generation companies - those that have PSAs with distribution utilities - are having the same predicaments and what financial coping mechanisms they have been pursuing.

On a broader scope, the regulatory body stated that it will also scrutinize how this development in the industry will weigh on the ‘least cost’ parameter of determining the winning bidders in CSPs -- especially if there would be eventual renegotiation in the power supply agreements.

The CSP refers to the auction process being carried out by the DUs to select the power suppliers they will be entering with for power supply deals – and that is a policy sanctioned by a decision of the Supreme Court rendered in 2019.

As indicated, the regulatory body will be scheduling a ‘clarificatory hearing’ so it can resolve the matter lodged before it – primarily the pending application of SMCGP on its plea to recoup P5.0 billion worth of losses due to escalating fuel expenses for its power generation ventures at the two specified power plants.

The initial move of the San Miguel group had been to issue ‘notice of termination’ of its PSAs with Meralco – and if ERC would not render a decision on the petition, that propounded contract cessation will be enforced by October 4 this year.

SMC warned that if its Ilijan and Sual power plants will stop supplying power to Meralco, the utility firm will need to source alternative electricity supply – and that could come at a higher price, especially if that will be purchased from the Wholesale Electricity Spot Market.

In the power firm’s computation, that will redound to P0.80 to P1.30 per kWh uptick in the bills of consumers, instead of the leaner P0.30 per kWh being applied for by Meralco.

Given the low-demand scenario in power usage of consumers at this point, Meralco conveyed that rotational brownouts will not be a likely outcome of the termination of the PSAs, but it acknowledged that higher cost procurement would be a high probability.