Manila Electric Co. (Meralco) is pressing a power subsidiary of conglomerate San Miguel Corp. (SMC) to cover the additional costs that it has been forced to shoulder after the latter decided to walk away from their power supply agreement (PSA).
The country’s largest power distribution utility formally issued a notice of claim to South Premiere Power Corp. (SPPC) on Dec. 12, asking it to pay the difference between the contract price under their PSA forged in 2019 and the prevailing prices on the Wholesale Electricity Spot Market (WESM).
Higher prices
Currently, WESM prices range from P7 to P9 per kilowatt-hour (kWh), substantially higher than the P4.30 per kWh fixed price under their supply contract, Meralco had said.
Meralco resorted to sourcing power from WESM as SPPC, a unit of SMC through its power unit SMC Global Power Holdings Corp., stopped supplying 670 megawatts of electricity to Meralco under the Ilijan PSA starting Dec. 7.
The decision came after the Court of Appeals issued a 60-day temporary restraining order in favor of SPPC, effectively halting the implementation of their 2019 supply contract and therefore freeing the SMC unit from selling power at the 2019 price.
SMC escalated the issue to the appellate court as the Energy Regulatory Commission (ERC) denied the joint SMC-Meralco petition for a rate increase to offset soaring coal and fuel prices as a result of Russia’s invasion of Ukraine.
Rate impact
Meralco has since started buying the 670 MW covered by the PSA from WESM, the central venue for trading electricity as a commodity, at higher prices that it has yet to fully pass on to its customers.
Meralco earlier said its customers would feel the rate impact of SMC’s supply agreement suspension by January next year.
ERC chair Monalisa Dimalanta estimated that a Meralco customer consuming 200 kWh a month will then pay an additional P60 to P80 a month.
Jose Ronald Valles, first vice president and head of regulatory affairs of Meralco, said in a letter addressed to SPPC general manager Elenita Go that its claims for SPPC to cover the extra costs will be on top of “all applicable fines, penalties and liquidated damages under the PSA in the event that the Court of Appeals eventually resolves the main case denying the Petition for Certiorari and/or claim of SPPC.” INQ