Meralco asks CA to deny SMC unit plea to suspend power deal

Manila Electric Co. , the country’s largest power distributor, has asked the Court of Appeals to deny the plea of San Miguel Energy Corp. (SMEC) to suspend their power supply agreement (PSA).

Meralco argued in its Dec. 21 motion that if the CA would grant the temporary restraining order (TRO) and writ of preliminary injunction sought by the power unit of conglomerate San Miguel Corp. (SMC), it would lead to the termination of their power supply deal, thus disrupting the supply of electricity and expose its 7.6 million customers to potentially higher power rates.

“With due respect, the possible grant of the TRO or writ of preliminary injunction will lead to Petitioner SMEC’s cessation in supplying electricity to Meralco, which it is obligated to do pursuant to the terms and conditions of the PSA,” Meralco said.

Unnecessary burden

The appellate court, it added, should deny SMEC’s application and “direct the parties to continuously implement the PSA that would serve and protect the public from the unnecessary burden of increased electricity costs.”

SMEC is under a contract forged in 2019 to supply 330 megawatts of baseload or uninterrupted power to Meralco at P4.0056 per kilowatt-hour (kWh).

A unit of SMC Global Power Holdings Corp. (SMCGP), SMEC asked court relief to allow it to walk away from the contract after the Energy Regulatory Commission (ERC) denied its joint appeal with Meralco for a temporary rate hike, which it said was needed to recover higher costs of supplying electricity that it could not pass on to its customers.

Another SMCGP subsidiary, South Premiere Power Corp., sought the same relief from the courts and was able to win a 60-day TRO from the CA that essentially freed it from supplying Meralco 670 megawatts for 10 years.

Obligations

Meralco has also asked that this TRO be lifted to hold the SMC units to their obligations under their power supply agreement that would shield Meralco customers from Wholesale Electricity Spot Market prices that stand at P9.12 per kwh as of Dec. 12.

SMC said, however, that the escalation in the cost of fuel this year following Russia’s invasion of Ukraine had led to some P15 billion in losses that it had to absorb since the ERC had rejected its plea for a temporary rate hike. As to continue absorbing heavy losses was not an option, SMC ceased supplying capacity to Meralco under their agreement this month.

With the SMC units suspending their PSA with Meralco, the distributor was forced to go to the open market, but some relief could be in store as it had forged an emergency power supply deal with Aboitiz Power Corp. unit GNPower Dinginin Ltd. at P5.96 per kWh.