SMC Global Power Corp., the power arm of San Miguel Corp. said Tuesday it notified Manila Electric Co. that it is ceasing the supply of 670 megawatts to the power retailer effective Dec. 7.
SMCGP said the right to unilaterally terminate was allowed under the power supply agreement with Meralco as part of necessary mitigation measures under the long-term, fixed rate supply deal, particularly in the event of a “change in circumstances”.
SMCGP said this came seven months after it filed a joint petition with Meralco for a temporary rate hike which was rejected by the Energy Regulatory Commission despite proving to be the least costly for power consumers.
The Court of Appeals issued a notice of resolution and a temporary restraining order enjoining the ERC and Meralco from implementing the ERC order which denied the joint petition filed by SMGP’s subsidiary South Premiere Power Corp and Meralco for a temporary 60-day relief.
SMCGP said the cessation of supply, covered by the resolution and the TRO, is immediately executory.
SMC president Ramon Ang said that from the beginning, the power firm did not want to terminate the power supply agreement and that was why it was seeking just a temporary, six-month relief. He said SPPC was forced to source capacity from the Wholesale Electricity Spot Market, which triggered even higher price spikes, further affecting the company’s costs to supply Meralco.
“From the very start, we were very transparent and clear with the ERC: We were not asking for a permanent increase, we did not want to be relieved of our contractual commitments, we were just asking for temporary, equitable relief, given the undeniable and unforeseen circumstances that affect not just us, but all Filipinos and many economies worldwide,” Ang said.
“Unfortunately, despite being shown that granting our petition would have been the cheapest option for consumers, the ERC still denied our petition, fully-aware that this would force us to either continue absorbing significant losses—which no company can sustain—or terminate the PSAs, which would ultimately lead to higher electricity costs for consumers: much, much higher than what we were asking for,” he said.
SMCGP said the filing of a petition for a rate increase was a mitigation measure under the PSA, but this was denied by the ERC’s new leadership.
It said Meralco’s expert assessment and simulations showed the proposed temporary rate hike would be the “least cost option” for consumers, compared to the power distributor having to source emergency power supply, or conducting a fresh round of competitive bidding.
This finding was also independently validated by no less than the ERC’s own regulatory operations service, it said.
SMCGP assured there would be no impact on current level of system supply because the company would still continue to offer available and uncontracted capacity to qualified offtakers and to the spot market, despite the cessation of supply.
The company said the 1,200-MW Ilijan plant was undergoing repair works to improve its fuel efficiency and generation ramp rate.
SMCGP also reiterated its strong commitment to helping consumers weather higher electricity costs by proposing to make the entire 1,200-MW capacity of the Ilijan plant available to Meralco at a minimal capital recovery fee of P1 per kilowatt-hour.
SPPC also offered various options to optimize the sourcing of fuel for the Ilijan facility, which would give Meralco the flexibility to manage overall power costs while ensuring an adequate power supply in the coming months.