Meralco tells SPPC: Pay added cost of market-priced power


MANILA ELECTRIC Co. (Meralco) has asked a unit of SMC Global Power Holdings Corp. to pay the added cost it has been incurring for sourcing power from the spot market when the latter stopped supplying to the electricity distributor.

In a statement on Monday, Meralco said it had told South Premiere Power Corp. (SPPC) in a letter dated Dec. 12 to pay the difference between their contract price and the price at the Wholesale Electricity Spot Market (WESM), to which the utility is exposed amid a temporary restraining order (TRO) on their power supply contract.

“Meralco has been exhausting all efforts to protect its customers from potentially higher generation costs, while ensuring continuity of stable, reliable, and least cost power under the current circumstances,” the listed company said.

Meralco’s claim versus SPPC covers the additional costs it has been incurring during the 60-day TRO imposed on the parties’ power supply agreement (PSA) that was issued by the Court of Appeals in favor of SPPC.

The company said that since the cessation of supply starting on Dec. 7, it has been sourcing the 670-megawatt contract capacity from the spot market. SMC Global Power is the power arm of the listed conglomerate San Miguel Corp. (SMC).

The TRO was sought by SMC Global Power after the Energy Regulatory Commission (ERC) denied a petition it filed jointly with Meralco for a rate increase. The increase was meant to partially recover the losses incurred by SPPC and San Miguel Energy Corp. (SMEC), the administrators of the natural gas-fired power plant in Ilijan, Batangas, and the coal power plant in Sual, Pangasinan, respectively.

SMC Global Power sought to recover losses amounting to P5 billion while absorbing P10 billion. It claims to have lost P15 billion because of extraordinary circumstances, including soaring fuel costs, which were way higher than when its units forged the PSAs.

Last week, Meralco said that it had been sourcing power from WESM after SPPC stopped supplying to the company.

Data provided by the ERC showed that the contract between Meralco and SPPC accounted for 13.4% of the former’s power supply for November. It was priced at P4.2455 per kilowatt-hour (kWh) versus the average WESM price for the period which was P8.47 per kWh.

Aside from the additional cost of sourcing power from WESM, Meralco also said that it was asking SPPC to pay fines, penalties, and liquidated damages under the PSA.

“The claims will be on top of all applicable fines, penalties, and liquidated damages under the PSA in the event that the Court of Appeals eventually resolves the main case and denies the Petition of SPPC,” Meralco said.

Meanwhile, Meralco is rushing to seal a contract for emergency power supply after it secured from the Department of Energy a certificate of exemption from the competitive selection process.

So far, Meralco has negotiated with Aboitiz Power Corp., which offered 300 MW of capacity for two months or until Jan. 25. The company is also considering the offer of SMC Global Power, which offered the 1,200-MW capacity of its Ilijan plant in Batangas.

Separately on Monday, SMC Global Power said that it has an existing supply contract with the government over the so-called Malampaya banked gas.

In June, SMC purchased the remaining banked gas of state-led Philippine National Oil Co. (PNOC) at 70.26 petajoules for $1.2 billion. SMC said that PNOC has yet to deliver the banked gas it bought.

SMC Global Power’s statement comes after the Malampaya consortium on Sunday denied that it was refusing to deliver the banked gas to SMC Global Power.

The consortium claimed that SPPC has no live contract and delivering banked gas to it will be considered illegal.

Members of the Malampaya consortium are Prime Energy Resources Development B.V., which has a 45% stake; UC38 LLC, and PNOC Exploration Corp., which own a 45% and 10% interest, respectively. They are the contractors under Service Contract (SC) 38, which cover the Malampaya gas field.

Earlier, SMC said that the banked gas would support the fuel requirements of Ilijan until the first quarter of 2024. Its gas supply agreement ended in June, the consortium said.

“In fact, in our discussions for the sale of the banked gas, PNOC disclosed to SPPC that the government has fully paid the Consortium for the gas, which means that 100% of the gas should be deliverable to SPPC,” SMC Global Power said.

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. — Ashley Erika O. Jose

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