Meralco seeks term extension clause in power supply deal
BY LENIE LECTURA – APRIL 12, 2022
from Business Mirror
THE Manila Electric Co. (Meralco) wants the power supply agreement (PSA) for the proposed 180megawatts (MW) of baseload supply to be valid for five months since the Competitive Selection Process (CSP) has yet to commence.
The utility firm’s proposed 180MW CSP runs from May 26 to July 25 this year. However, the proposed timeline in the terms of reference (TOR) may not be met due to time constraints.
The first competitive auction last March 31 was declared a failure because there was no expression of interest received by the Third Party Bids and Awards Committee (TPBAC). Before it proceeds to conduct a second CSP, the TPBAC said there is a need to revise the TOR to account for the filing and approval process of the Energy Regulatory Commission (ERC) of the resulting PSA prior to its implementation and considering that the required contract period of the 180MW CSP is only up to July 25.
“Accordingly, Meralco proceeded to revise and update the TOR for the second round of the 180MW CSP,” Meralco First Vice President and Head of Regulatory Management Jose Ronald Valles told the Department of Energy (DOE) in a letter.
The DOE needs to approve the revised TOR first.
Meralco said the extension, if approved by the DOE, will address the concern that there is only a period of two months remaining in the required contract period while the CSP has yet to start and ERC approval has yet to be sought for the resulting PSA.
“Also, the allowance for a possible extension of up to five months mirrors the length of the original required contract period, and more importantly, is consistent with the rationale to mitigate indefinite exposure of our customers to additional generation costs associated with running the SPEX-Malampaya gas-reliant plants on liquid fuel, given the continuous rise of fuel prices in view of the Russia-Ukraine conflict. In any case, such term extension clause, which shall also be reflected in the resulting PSA, is subject to approval by the ERC,” Meralco said.
Should the DOE decide that Meralco should no longer proceed with the second round of CSP, “we hope to get DOE’s reply as soon as possible considering that we will need to inform the suppliers of the SPEX-Malampaya gas-reliant plants that they will be constrained to run on liquid fuel.
On this point, it is material to reiterate that the cost of using liquid fuel is almost twice as using SPEX-Malampaya natural gas, which can easily result in higher generation costs.”
Forming part of the 350MW power requirement that Meralco needs to augment available supply during the summer months, this 180-MW supply is meant to cover for the output of plants that are affected by Malampaya facility’s continued inability to supply adequate natural gas fuel.
Last February, Meralco entered into a PSA with South Premiere Power Corp. following the CSP for the initial 170-MW of peaking power requirement. The PSA is now with the ERC for approval.
