ERC to weigh rate impact of terminated SMC supply deals

The Energy Regulatory Commission (ERC) said it will weigh the rate impact as well as implications on next year’s supply of the terminated power supply agreements (PSAs) between power utility giant Manila Electric Company (Meralco) and the subsidiaries of SMC Global Power Holdings Corporation of the San Miguel group.

ERC Chairperson Monalisa C. Dimalanta indicated that the terminated PSAs may not have immediate impact on the electric bills of consumers this year, but this will have implication on power supply for Luzon grid next year.

“There’s no immediate impact because the plants are not supplying yet. The real concern is on the security of supply next year … because where will you get the replacement,” the chief regulator stressed.

If delivery of new capacity additions will be delayed, she pointed out that the likely consequence will be tighter supply predicaments – especially for Luzon grid, hence, that will trigger further uptick in electricity rates.

Over the weekend, Meralco affirmed that SMC subsidiaries – Excellent Energy Resources Inc. and Masinloc Power Partners Co. Ltd. – issued notices of termination for the 20-year PSAs inked with Meralco for the delivery of 1,200-megawatt capacity from its new gas-fired power project by December 2024; and another 600MW capacity by May 2025 from the proposed expansion of its Masinloc coal-fired power facility.

There are no specific information provided by the ERC, Department of Energy (DOE) or even Meralco if the plants with terminated PSAs will still come on-line next year; or if they will be incurring delays or the projects will be shelved.

For Meralco, the option it will be pursuing is to conduct new round of competitive selection process (CSP) covering the terminated contracts for 1,800MW capacity to be approved by the Department of Energy.

CSP is the bidding process for capacity that distribution utilities, like Meralco, will need to procure and will be underpinned with corresponding PSAs – to be anchored on the approval of the DOE.

At this stage, Dimalanta asserted “we’re waiting for their (Meralco) filing…we are expecting that they will file something. Once we receive that, we will evaluate the basis for termination.”

She added “if we will see their filing and there would not be as much complication, then we might refer that already to our legal services for evaluation.”

Dimalanta further noted “when I looked at the PSA applications over the weekend, it had really gone beyond six months already, which is the longstop date” – that is in reference to the prescribed period in the contracts wherein all deliverables of the parties shall be completed or complied with, including the approval of the PSAs.

The ERC chief still emphasized though that “we need to check if there had been requirements enforced on them (Meralco and SMC subsidiaries) that they failed to file, that’s why their PSA applications had not been acted upon by the Commission – those are the things that we will need to study.”