Two energy units of San Miguel Corp. asked the Energy Regulatory Commission for a temporary price adjustment of their 2019 power supply agreement with Manila Electric Company following the staggering increases in fuel prices.
SMC subsidiaries South Premiere Power Corp. and San Miguel Energy Corp. filed separate appeals to adjust their respective PSAs with Meralco to recover a portion of the actual fuel cost.
Meralco head of regulatory management office Jose Ronald Valles confirmed the SMC filings with the ERC.
“SMC claims it is incurring huge losses due to the continued increase of fuel prices at unprecedented levels. SMC wants to recover actual fuel cost without any margin,” said Valles.
“We are concerned that the continued implementation of our PSAs will be affected once SMC suffers huge losses, which could force it to stop delivering power to our customers,” he said.
Meralco signed the 10-year PSAs with SPPC and SMEC in 2019.
SMEC contracts involve 330 megawatts of baseload supply from the Sual coal-fired power plant at an all-in headline rate (VAT inclusive) of P4.6314 per kilowatt-hour and computed all-in LCOE (VAT inclusive) of P4.9299 per kWh.
SPPC’s contract involves 670 MW of baseload supply from the Ilijan natural gas plant and has an all-in headline rate (VAT Inclusive) of P4.6314 per kWh and computed all-in levelized cost of electricity (VAT inclusive) of P4.93 per kWh.
Both coal and natural gas power prices increased at unprecedented levels on high demand and tight supply.
“We cannot afford to lose our PSAs with SMC, which supply more than 1,200-MW baseload and mid-merit capacities. If SMC decides to terminate our PSAs, our customers will inevitably suffer. Our PSAs provide any such claim will need regulatory approval. Hence, we have elevated the matter to ERC for their evaluation and consideration,” Valles said.
Sources said the Ilijan plant experienced unexpected deration in its 1,200-MW on unilateral gas restrictions from the Malampaya gas wells in northwest Palawan.
This forced SPPC to source its contract capacity with Meralco from the spot market, which is already affected by tight and aging power supply sources in the face of a steadily increasing system demand.
Sources said these issues led to significant losses on the part of SMEC and SPPC.
“The case is still ongoing. It is not yet ripe for decision. There are still filings to be made. We are taking note of the appeal. On the other hand, we will look at the value chain, what is equitable,” outgoing ERC chairperson Agnes Devanadera said over the weekend.
Devandera retired on July 10, while ERC commissioner Alexis Lumbatan was designated as officer-in-charge.
The 2019 contracts also include Meralco’s PSA with Phinman Energy Corp. which is now ACEN Corp.
ACEN’s contract involves 200 MW with an all-in headline rate (VAT inclusive) of P4.7450 per kWh and computed all-in LCOE (VAT Inclusive) of P4.8849 per kWh.
The three PSAs, which were a result of a competitive selection process, have a total contract capacity of 1,200 MW and will supply Meralco effective Dec. 26, 2019, for a term of 10 years.