‘Closing Meralco PSAs with SMC power units to give consumers a huge burden’

Meralco Building in Ortigas Avenue in Pasig City

THE Manila Electric Company (Meralco) warned on Tuesday that consumers would have to shoulder billions of pesos if its power supply agreements (PSA) with San Miguel Corp.’s (SMC) power units were terminated. The same result will happen if the temporary rate relief petitions they filed will not be approved.

Meralco officials presented various scenarios before the Energy Regulatory Commission (ERC) during Tuesday’s hearing.

Under scenario 3, there is an estimated P1.6-billion incremental burden to consumers if  Meralco will source from the Wholesale Electricity Spot Market (WESM).

“The expected WESM rates are higher by P2.94 per kilowatt hour [kWh] versus the rates of the SMC PSAs, even if the Changes in Circumstances (CIC) claims are approved. Increase in WESM prices will also affect not only Meralco customers but the entirety of customers in the Luzon and/or Visayas grids,” it said.

The P2.94 per kWh difference between WESM rates and that of the PSAs are equivalent to P1.64 billion for one month, Meralco said.

Under Scenario 2B, there is an estimated P25.8 billion incremental burden to consumers if the PSAs are terminated and Meralco opts to secure replacement PSAs through conduct of competitive selection process (CSP) covering the remaining term up to 2029.

It said that the replacement tariff under the replacement new PSA would be P2.24 per kWh higher than estimated 2023-2029 rates of the SMC PSAs sought to be replaced.

Under scenario 2A, there is an estimated P12.6 billion incremental burden to consumers if the PSAs are terminated and Meralco will opt to secure emergency PSAs through DOE exemption from CSP covering one-year term.

The expected tariff under the replacement emergency PSAs will be P3.49 per kWh higher than the rates of SMC PSAs sought to be replaced and P1.92 per kWh higher compared to rates of the SMC PSAs, even if the CIC claims are approved.

“Meralco believes that it can continue supplying power to its customers at the least cost by preserving the PSAs while addressing the financial concern of power suppliers through recognition of the CIC claim. This is inline with the twin objectives of EPIRA to balance the interest of consumers and investors,” Meralco said.

The ERC has yet to decide on the case.

South Premiere Power Corp. (SPPC) asked the ERC for a rate increase from January to May 2022, of P0.80 kWh from P4.3 to P5.1/kWh for its 670 megawatt (MW) of contracted baseload capacity from the Ilijan plant, and an average of P4.0/kWh, from P4.3 to P8.3/kWh for San Miguel Energy Corp.’s (SMEC) 330 MW contracted baseload capacity from the Sual plant.

The net rate impact however to Meralco, assuming that this cost recovery claim is granted by the ERC, is just P0.28/kwh over a period of six months.

If the ERC fails to act on the joint petitions and SMC’s power units terminate their PSAs with Meralco, electricity prices are still expected to go up by as much as 30 percent starting October, SMC warned.

Image credits: Patrick Roque/Wikimedia Commons Commons