Aboitiz, San Miguel may split new power deal with Meralco

Manila Electric Co. (Meralco) is looking to seal a power supply deal with one or two generation firms next week— a move that might see Aboitiz and San Miguel groups each getting a share of the pie.

The country’s largest electricity retailer said it was still assessing the proposals, but it could, in the end, each give a chunk of the 670 megawatts (MW) of supply as the power distributor needs additional electricity at the soonest time possible.

“We’re trying to close that as soon as possible,” Lawrence Fernandez, vice president and head of utility economics of Meralco, said in a briefing.

“Hopefully, [we want to award the contract] by next week so we’re trying to rush the negotiations,” he added.

The company is scrambling to ink an emergency power supply agreement after South Premiere Power Corp. (SPPC), a subsidiary of San Miguel Corp. through its power unit SMC Global Power Holdings Corp. (SMCGP), suspended their contract.

Aboitiz Power Corp., the power business of Aboitiz Equity Ventures Inc., is proposing to deliver 300 MW of power coming from the coal-fired power plant of GNPower Dinginin Ltd. Co., a partnership between Aboitiz and Ayala groups, for less than two months or until Jan. 25, 2023 at P5.95 per kilowatt-hour (kWh).

Alternative suppliers

On the other hand, SPPC is offering the entire output of the 1,200-MW Ilijan gas-fired power plant, which would cost Meralco a total of P1.30 per kWh — P1 per kWh in capital recovery fee, or half of the facility’s capital cost, and a variable cost of 30 centavos per kWh.

Meralco earlier said in the case of SMC’s offer, they would be the one to procure the fuel source to operate the Ilijan power facility.

As of writing, Meralco, Lopez-led First Gen Corp. and SPPC are still negotiating the possible transfer of First Gen’s fuel allocation coming from the Malampaya gas field.

“Those discussions are still ongoing. There are operational issues that will need to be resolved on how to actually make it work and then codify that into a contract,” Fernandez said.

On Wednesday, SMCGP suspended the supply of 670 MW covered by its 2019 power supply agreement with Meralco.

This was in line with the 60-day temporary restraining order granted by the Court of Appeals in favor of San Miguel.

“From our end, the Office of the Solicitor General filed yesterday a motion to the Court of Appeals to lift or dissolve the TRO,” said Energy Regulatory Commission chair Monalisa Dimalanta in an interview with dzBB on Thursday.

“That’s the first solution that we are doing on the case filed before the CA,” she added.

In cases like this, distribution utilities (DUs) such as Meralco are allowed to immediately secure power supply without going through a competitive selection process (CSP) by securing an exemption.

CSP refers to the process of procuring the electricity requirements of a DU via competitive bidding at the least cost to consumers.

In the meantime, Meralco has started sourcing electricity from the Wholesale Electricity Spot Market, whose prices are higher and more volatile based on historical data.

Fernandez said some 7.5 million customers of Meralco may feel the impact of the recent developments by January next year.

“But again, we’ll need to see what the net impact will be. Other factors will still need to be evaluated like, for example, the effect of the continued depreciation of the peso on generation cost and the expected improvement of the supply situation in the coming days as demand goes down with the approach of the holidays,” he explained.

Dimalanta said in the same radio interview that a typical Meralco customer consuming 200 kWh is expected to pay an additional P60 to P80 for the month.