SMC power unit pleads for temporary relief | Inquirer Business

SMC power unit pleads for temporary relief

SMCGP: Relief needed to preserve remaining key power deals that protect consumers

Customers in Metro Manila and adjacent provinces may end up paying more in the long run if regulators won’t grant the temporary relief that SMC Global Power Holdings Corp. (SMCGP), the power business of listed conglomerate San Miguel Corp., has sought.

In a statement, SMCGP said electricity rates may rise by as much as 30 percent beginning October should the Energy Regulatory Commission (ERC) fail to act on its joint petition with power distributor Manila Electric Co. (Meralco) for a temporary rate hike on their two power supply agreements (PSAs).

The proposed temporary rate hike of P0.30 per kilowatt-hour will be amortized for six months if the regulator approves the petition.


Losses from operating the Sual coal and Ilijan natural gas power plants since last year already amounted to P15 billion yet SMCGP is seeking temporary and partial cost recovery relief to cover only the P5.2 billion losses sustained from January to May this year.


SMCGP is asking for a “fair and objective assessment” of its petition filed in May as both facilities continued to incur losses due to the record rise in global fuel prices driven by economic and geopolitical forces.

The power plants account for 25 percent of the net reliable capacity of the Luzon grid.


“They are a major part of the country’s already fragile power supply. We ask that in this time of extraordinary circumstance and difficulty, please, let’s not cripple them,” said SMCGP president Ramon Ang.

The temporary rate hike, the company said, would also ensure that the fixed-rate stipulated in supply deals would be maintained over the longer term and would continue to mitigate the soaring cost of electricity for consumers.

Without an approved rate hike from the ERC, SMCGP said it will be forced to terminate the supply deals it made with with Meralco in 2019.

South Premiere Power Corp. and San Miguel Energy Corp., administrators of the Ilijan and Sual plants, respectively, had already issued to Meralco notices of termination of their PSAs which would take effect on Oct. 4 sans the ERC approval.

SMCGP said “without [the relief] and with a termination of the PSA, Meralco has estimated an increase of at least 80 centavos up to P1.30/kWh in the price of electricity over the next 3-4 months, as it will have to find alternative sources that will most likely be costlier, including the Wholesale Electricity Spot Market (WESM).”

WESM is the venue for trading electricity as a commodity.

“Should Meralco opt for emergency power supply procurement, the increase is expected to further go up with the weakening peso and surging global fuel prices,” it added.

The SMC power unit earlier said global coal prices continue to breach the $400-per-metric-ton level, way above the $60- to $65-per-MT range when the supply agreements were signed.

It also expects hefty price increases over the term of the contracts until 2030 if the ERC won’t act upon its request.

Ang said the company continues to hold the door open for further discussions with relevant government agencies and would work with Meralco to ensure supply through October when the termination takes effect.

“We know any price increase is unpopular, and normally we never ask for one—which is what we did for all of last year, when we absorbed expanding costs that we do not pass on to consumers. The war in Ukraine has taken prices far beyond what we and Meralco, could have even imagined in 2019, when we signed the PSAs,” Ang said. INQ

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TAGS: ERC, Meralco, power supply deals, SMC Global

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