Terminated PSAs of Meralco, SMGPH firms to be reviewed

THE Energy Regulatory Commission (ERC) will review the terminated power supply agreements (PSAs) of the Manila Electric Company (Meralco) and the subsidiaries of San Miguel Global Power Holdings (SMGPH) Corp. for possible violations.

“[The] ERC will review the validity of the termination and observance of parties of the proper notice and procedures to see if there is any violation,” ERC Chairman Monalisa C. Dimalanta said in a text message.

On Friday night, Meralco said it was informed by SMGPH that the PSAs—with a total capacity of 1,800megawatts (MW)—between Meralco and Excellent Energy Resources Inc. (EERI) and with Masinloc Power Partners Co. Ltd. had been terminated.

“We confirm receipt of notices from San Miguel Global Power,” said lawyer Jose Ronald V. Valles, head of Meralco’s Regulatory Management Office.

These two PSAs are supposed to deliver 1800MW starting 2024 until 2025 to Meralco. Under the PSAs, EERI should deliver 1,200MW of gas-generated capacity starting December 2024 and the remaining 600MW from Masinloc Power starting May 2025.

Valles said Meralco will exhaust all options in order to replace the capacity under the terminated PSAs that underwent competitive selection process (CSP) in February 2021. The PSAs were submitted for ERC approval in March 2021.

“We intend to rebid the same capacity to cover the same term. Let’s wait for the result of that bidding,” he replied when asked for the impact of the terminated PSAs on Meralco consumers.

Another round

VALLES said Meralco will request that the Department of Energy (DOE) to conduct another round of CSP “as soon as possible.” However, Meralco would first have to submit to the DOE the proposed terms of reference for the CSP.

When sought for comment, Energy Secretary Raphael P.M. Lotilla said in a text message that his office would wait for the filing.

Dimalanta, meanwhile, commented that the termination would have an impact “on the supply for 2023-2024 because these PSAs are supposed to start delivering then.”

San Miguel Global Power has yet to issue a comment when asked for the reason of the termination.

Consumer advocacy group People for Power (P4P) claimed that the reason for the termination was “due to the unaffordability of selling electricity using coal and gas.”

“We welcome this development. In the past, P4P also filed our opposition to the CSP that brought forward these contracts, which would have allowed SMC’s subsidiaries and Meralco to pass onto consumers additional costs from highly volatile prices of coal and gas electricity.

With EERI and Masinloc Power backing out, consumers are spared from the surely costly bills they would have been charged out of the two contracts,” P4P Convenor Gerry C. Arances was quoted in a statement as saying.

‘Best’ bids

HOWEVER, EERI and Masinloc Power were the two “best” bids that offered a low levelized cost of electricity (LCOE) of P4.1462 per kilowatt hour (kWh) for EERI and P4.2605 per kWh for Maisnloc Power. Both offers were below the LCOE  reserve price of P5.2559 per kWh.

Back then, the bid offers of Mariveles Power Generation Corp., Atimonan One Energy Inc. (A1E), and GNPower Dinginin Ltd. Co. (GNPD), which stood at P4.3321 per kWh, P4.6338 per kWh, and P5.2500 per kWh, respectively, were considered by the Third Party Bids and Awards Committee as the “possible next best bids.”

Earlier, two SMGPH subsidiaries terminated their PSAs with Meralco after the ERC rejected their request to temporarily hike electricity prices due to financial losses caused by rising fuel prices and inflationary pressures.

The Court of Appeals (CA) granted the petition for a writ of preliminary injunction filed by South Premiers Power Corp. (SPPC), effectively suspending the power supply contract for 670MW that was supposed be sourced from Ilijan gas plant and supply the capacity to Meralco.

“The purpose of injunction is to prevent threatened or continuous irremediable injury to the parties before their claims can be thoroughly studied and adjudicated,” the CA explained. “Its sole aim is to preserve the status quo until the merits of the case are fully heard.”