Meralco secures SEC nod to source power from TMO

Pedestrians walk past a Meralco sign in suburban Manila in this file photo. AFP FILE PHOTO

MANILA, Philippines—Manila Electric Co., the country’s biggest power distributor, has secured regulatory approval for its power supply agreement with Therma Mobile Inc. (TMO) of the Aboitiz group.

This development is expected to result in lower power rates and stable power supply.

In a disclosure to the Philippine Stock Exchange, Meralco said it received on Wednesday the order from the Energy Regulatory Commission, which allowed the power distributor to source as much as 234 megawatts from TMO’s four power barges.

Sourcing a portion of its electricity requirements from the power barges, which are currently moored at the Navotas fish port, may lead to a decline in Meralco’s blended generation cost by 12.99 centavos per kilowatt-hour (kWh). The average price of power sourced from the wholesale electricity spot market (WESM) WESM alone stood at about P12.4654 per kWh.

“The proposed rates are reasonable and will redound to the benefit of Meralco’s customers in terms of continuous, reliable, efficient and affordable power supply,” the ERC said in an order dated Nov. 4.

The power supply agreement is valid until June 25, 2017.

Based on its filing, Meralco said the additional supply from the power barges would allow it to reduce its exposure to the more expensive power being traded at the WESM during the Malampaya gas facility shutdown, which began last Nov. 9 and will last up to Dec. 8.

“A significant portion of the plant portfolio depends on the Malampaya gas facility. During the said period, it will be exposed to the WESM where price is known to be volatile. What further aggravates the situation  is that certain plants (such as Pagbilao power plant unit 2, Ilijan power plant unit 2, Calaca power plant unit 2 and San Lorenzo power plant unit 50) will be undergoing maintenance schedule,” the company explained.

“These events will put much strain on the supply side that will likely drive the market price into very high levels, thereby probably resulting in price shocks on its end-users.”

If it goes without an alternative source, Meralco will be constrained to buy its requirements from WESM, especially during the so-called peak hours. The agreement with TMO will thus reduce the power distributor’s exposure to the high spot market prices as the contracted energy will be drawn from the power barges during peak hours.