ERC denies SMC-Meralco rate hike application

By Myrna M. Velasco – October 3, 2022, 9:23 PM
from Manila Bulletin

The Energy Regulatory Commission (ERC) has denied the P0.30 per kilowatt hour (kWh) rate hike that had been jointly applied for by the Manila Electric Company (Meralco) and SMC Global Power Holdings (SMCGP) of the San Miguel group.

In a ruling issued by the power industry regulator on Monday, Oct. 3 evening, ERC reminded Meralco of a ‘fixed price’ power supply agreement (PSA) it had entered into with the subsidiary-firms of SMCGP – the South Premiere Power Corporation (SPC) for contracted capacity from the Ilijan gas-fired power plant, and Masinloc Power Partners Ltd. Co. for the Masinloc coal-fired power facility.

Three of the ERC Commissioners, including ERC Chairperson Monalisa C. Dimalanta, voted in favor of the rate hike denial; while two Commissioners had given their dissenting opinion on the ruling.

SMC sought for P0.30 per kWh rate increase to be passed on to the consumers over six months to recoup P5.2 billion worth of foregone revenues that accrued from January to May this year due to the surge of fuel prices in the world market – primarily coal which escalated to as high as $440 million per metric ton (MT) from $60-$65 per MT when the contracts were signed in 2019.

“Meralco, as a regulated entity, is enjoined to ensure the preservation of the PSA under the approved terms to protect the consumers for whose benefit it has secured this supply under a fixed price arrangement for the 10-year period from the adverse effects of such termination,” the ERC stressed.

On earlier assertions of possible termination of the Meralco-SMC contracts, the regulatory body reminded the parties, primarily Meralco, “to observe not only their reciprocal obligations, but more importantly, the obligation to supply electricity consumers in the least cost manner.”

Relative to the gas supply restriction in the Malampaya field, the ERC similarly qualified that “it is not difficult to imagine that major industry players, including SPPC are aware of the gas supply issues.”

It thus stipulated that “it is within the realm of reasonable expectation that when SPPC participated in the competitive selection process conducted by Meralco in 2019; and when awarded for its bid, entered into the subject PSA within the same year, it was foreseeable for SPPC that there would be instances within the PSA term wherein gas supply from the Malampaya gas field could be restricted, and that the challenges in procuring power from other sources were factored in its price offer.”

SMCGP previously stated it will opt for termination of its PSAs with Meralco if it will not be able to secure “rate relief” via its filing with the regulatory body of the industry.