Manila Electric Co. (Meralco) is continuing to procure power beyond its original agreement with First Gas Power Corp. following the Department of Energy (DOE) directive aimed at maintaining grid stability in Luzon.

Ronald Valles, Meralco senior vice president and head of regulatory management, said Luzon’s largest power distributor has continued sourcing supply from the natural gas-fired Sta. Rita power plant even after their deal expired on June 25, under the instructions from the DOE.

First Gas is a joint venture between Razon-led Prime Infrastructure Capital Inc. and Lopez-led First Gen Corp.

“Meralco sources about 50 to 60 percent of its supply requirements from natural gas-fired power plants. If not contracted by Meralco, the Luzon grid will experience a supply shortage, which would result in prolonged power interruptions,” Valles said.

He noted that Meralco is the only power distributor in the country sourcing electricity from natural gas, which naturally leads to higher generation costs.

Meralco has procured power from the 1,000-megawatt (MW) gas plant in Batangas for more than 20 years. Although its original contract was previously extended by the Energy Regulatory Commission (ERC) from August 2023 through last month, Valles noted that the facility remains welcome to participate in the upcoming mid-merit supply bidding.

While the DOE’s intervention allows Meralco to secure supply and safeguard Luzon’s grid stability, it comes at a higher price. Valles emphasized that natural gas generation is inherently more expensive than coal, even before recent geopolitical tensions.

Addressing higher electricity rates during a Senate hearing on Thursday, the executive explained that surging generation charges have weighed heavily on consumers’ bills.

“The recent electricity price increases pertain to generation charges, which reflect the spike in international fuel prices and peso depreciation stemming from the conflict in the Middle East, along with the government’s policy favoring natural gas as a transition fuel and the suspension of new coal-based plants,” Valles elaborated, underscoring that generation rates are entirely “beyond Meralco’s control.”

He clarified that every peso collected for generation goes directly to power producers under strict government oversight. Meanwhile, the distribution charge—the portion Meralco actually keeps for delivering power to households—has dropped by 18 percent since 2014, bucking the general trend of rising daily costs for food and transportation.

Valles also attributed higher summer bills to increased household consumption, which typically spikes during hot months when cooling appliances run longer.

According to earlier DOE data, Meralco ranks fourth-highest nationwide in residential electricity charges, with its residential rate recorded at ₱14.18 per kilowatt-hour (kWh) in June.