Meralco vows to prevent termination of SMC deals

MANILA ELECTRIC Co. (Meralco) said on Tuesday that it intends to comply with the order of the Energy Regulatory Commission (ERC) and exert all remedies to prevent the termination of its power supply deals with companies under San Miguel Corp. (SMC).

The company’s statement comes after the ERC, in separate orders promulgated on Sept. 29 and posted on its website on Monday night, denied the joint petitions filed by the SMC units and Meralco, saying the rate increase sought by the contracting parties is not based on a valid “change of circumstance” as called for under their power supply agreements (PSAs).

Jose Ronald V. Valles, head of Meralco’s regulatory management office, said that the power distribution utility has also “sought offers and entered into emergency power supply agreements (EPSAs) with other generation companies to ensure continuity of stable, reliable and adequate supply to Meralco customers.”

“However, in the event that SPPC (South Premiere Power Corp.) and SMEC (San Miguel Energy Corp.) will be unable to actually deliver power to Meralco for whatever reason, we are constrained to source up to 1,000 MW (megawatts) from WESM without prejudice to the resolution of whatever legal remedies Meralco may pursue against SPPC/SMEC under the PSA,” he said in a statement sent via Viber.

Ahead of the release of the ERC order, SMC President Ramon S. Ang told reporters on Monday: “Kung ayaw nila kaming bigyan ng temporary relief, tapos na. Kung bibigyan naman nila, ito yung mas makabubuti sa consumer (If they do not want to give temporary relief, it’s over. If they will give it, then it will be better for the consumer).”

At a press briefing on Tuesday, ERC Chairperson Monalisa C. Dimalanta said the petition was denied on the grounds that Meralco and SMC had a financial contract with a fixed price and that both parties did not exhaust all options before seeking a rate increase. 

“The cost of operations of a particular plant is really not that material to the fulfillment of obligation of the supplier to Meralco because they are permitted to get from another source,” she said.

Ms. Dimalanta noted Meralco’s estimate on the impact of the PSA termination is higher than the ERC estimate.   

In August, SMC said that SPPC and SMEC, the administrators of the coal power plant in Sual, Pangasinan, and natural gas-fired power plant in Ilijan, had incurred a combined loss of P15 billion.

Mr. Ang said in an earlier statement that they had absorbed P10 billion of the said loss, and were only looking to recover the P5-billion loss.

However, Ms. Dimalanta said SMEC and SPPC only submitted an unaudited financial statement to show the losses.

SMC earlier said that SPPC and SMEC have already issued termination notices to Meralco, effective on Oct. 4, if the regulatory body denied its appeal for relief.

Had the ERC approved the petition for temporary relief, it said electricity prices in Luzon would go up by 30 centavos per kilowatt-hour (kWh) over a period of six months.

However, in SMC’s previous statement it said that if ERC failed to act on its petition, electricity prices in Luzon and adjacent provinces will rise by as much as 30% starting this month.

Aaron Pedrosa, secretary-general of Sanlakas — a member organization of Power for People, urged the ERC and the Department of Energy (DoE) “to hold SMC accountable for economic sabotage should it really back out of its contract obligations to provide power to consumers.”

“In their scenario, it would force Meralco to buy from the Wholesale Electricity Spot Market (WESM), which will again push up prices for consumers. We’ve had enough of this blackmail,” he said in a statement.

For its part, the DoE said it is confident that SMC and Meralco “will be guided accordingly by the ERC Order and ensure uninterrupted power supply to our people and the country, notwithstanding the denial of their joint petition.”

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — A.E.O.Jose

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