The Energy Regulatory Commission (ERC) has given the green light to a 20-year power supply agreement (PSA) between Manila Electric Co. (Meralco) and Solar Philippines Tanauan Corp. (SPTC), a company run by Leandro Leviste—son of former senator Loren Legarda.
In a 75-page decision dated Feb. 28, the ERC approved the two partners’ contract price of P5.39 a kilowatt-hour.
The regulator also said the PSA approval should not affect ERC’s evaluation of SPTC’s application for a certificate of compliance, which would allow photovoltaic installations in two locations with a combined 50 megawatts to operate and supply Meralco.
The ERC said the contract price would help lower the power generation charge reflected in Meralco customers’ bills by 1.18 centavos a kWh.
“The applicants’ proposed rate of P5.39 subject to 2-percent annual escalation is reasonable based on the CSP (competitive selection process) undertaken and the commission’s previous rulings,” the ERC said.
The ERC also noted that the contract price was lower than the “true cost generation rate,” which the regulator calculated at P6.94 a kWh.
While SPTC tagged the cost of its project at P3.9 billion, the ERC took away proposed costs for switch yard and development as well as access road and other infra and settled at P3.5 billion.
At such numbers, the contract is expected to provide SPTC a 7.6-percent rate of return from its project.
In a statement, Meralco said the PSA—which both parties signed in December 2016—“was executed in support of renewable energy and the rate approved by the ERC is significantly lower than the prevailing solar feed-in tariff (FIT) rates.”
The distribution giant was referring to rates provided under the FIT scheme, which was meant to encourage investments in renewable energy projects such as solar and wind power.
This is the second PSA between Meralco and a unit of Solar Philippines. The other involves 75 MW from the latter’s solar farm in Tarlac province at a contract price of P2.99 a kWh.