ERC approves termination of Meralco, SMC deals
Energy Regulatory Commission (ERC) / STOCK
MANILA, Philippines — The Energy Regulatory Commission (ERC) has approved the termination of power supply deals between distributor Manila Electric Co. (Meralco) and subsidiaries of conglomerate San Miguel Corp. for 1,800 megawatts (MW) of crucial supply that must be delivered by 2024 and 2025, its top official told reporters.
ERC chair Monalisa Dimalanta explained that the six-month “longstop date,” or the agreed time frame during which all conditions required for a transaction must be completed, for both power supply agreements (PSAs) had already lapsed.
“We asked Meralco: ‘Did you ask them (San Miguel units) to extend? At least fight for the customer?’ We were told that they had asked for extensions twice, but that the San Miguel companies did not agree to a third extension,” Dimalanta said last week.
In March 2021, Excellent Energy Resources, Inc. (EERI) and Masinloc Power Partners Co. Ltd. (MPPCL) agreed to supply Meralco with 1,200 MW and 600 MW of power, respectively.
EERI was to source power from its liquefied natural gas plant at P4.1462 per kilowatt-hour (kWh), while MPPCL proposed to provide power via its coal-fired power plant at P4.2605 per kWh.
However, both companies filed for contract terminations in March this year, citing the ERC’s delayed approval of the agreements.
Dimalanta had said that EERI and MPPCL may have failed to submit required documents prior to final approval, although Meralco did not confirm this.
Sought for comment, Meralco head of regulatory management Jose Ronald Valles confirmed that they had received the ERC orders granting the termination and that they intended to replace the capacity through a competitive selection process (CSP).
“We have already submitted new [terms of reference] for this 1,800-MW CSP, considering that we need to implement the resulting PSAs by December 2024 for 1,200 MW and May 2025 for 600 MW after ERC approval,” Valles said.
CSP refers to the bidding process that power suppliers must undergo before providing power to a distribution utility such as Meralco.
The ERC issued revised CSP guidelines on Oct. 3. The new policy now allows distribution utilities to procure supply without depending on a specific power plant, allowing “greater assurance of supply” and ensuring consumers of reliable delivery.
It also allows the blacklisting of suppliers that are not able to deliver their obligations “without due cause,” but contract terminations may still happen as long as these comply with PSA terms.
According to Dimalanta, Meralco will have to observe the new CSP guidelines in the bidding for the 1,800-MW power deals.
“Distribution utilities (DUs) have to define the terms and comply, enforce the terms of their PSA. This goes not just for DUs but also for electric cooperatives because we need to make sure that the terms of their contract are observed or respected,” she said.
