Meralco moves to secure emergency power supply deal

MANILA ELECTRIC Co. (Meralco) said it is working on securing a power supply contract after its deal with GNPower Dinginin Ltd. Co. (GNPD) ended on Feb. 25, forcing it to buy from the electricity spot market.

In a Viber message, a representative of Meralco said that it aims to secure another emergency power supply agreement (EPSA). Its previous emergency deal for 300 megawatts (MW) with Aboitiz Power Corp.’s GNPD ran from Feb. 3 to 25. It was the second time that the power distributor forged an EPSA with the power generation company.

Last year, Meralco secured an EPSA with AboitizPower for P5.96 per kilowatt-hour (kWh) from Dec. 15, 2022 until Jan. 25, 2023. Its EPSA with GNPD for most of February was not a fixed-rate contract.

Meralco said that it is in a constant effort to secure contracts to partly cover its 670-MW deal with a unit of SMC Global Power Holdings Corp. that remains suspended.

Its move to secure an EPSA came after its power deal with South Premiere Power Corp. (SPPC), the administrator of the gas-fired power plant in Ilijan, Batangas, was subjected to a writ of preliminary injunction issued by the Court of Appeals.

The 670-MW capacity is supposed to be covered by Meralco’s power supply agreement (PSA) with SPPC, which was agreed upon in 2019 for a period of 10 years at P4.2455 per kWh. However, the deal was indefinitely suspended after the injunction issued by the appellate court in January.

Last year, SMC Global Power sought a temporary rate increase, jointly filed with Meralco, saying that SPPC and another unit San Miguel Energy Corp. incurred a combined loss of P15 billion. The rate increase was meant to recover part or P5 billion of the units’ losses.

The company cited a “change in circumstance” when surging fuel costs breached the price range contemplated during the execution of the contracts with Meralco. However, the Energy Regulatory Commission denied the petition, saying this had no basis as the PSA is a fixed-rate contract.

The power distributor earlier said that it maintains its position that preserving the PSA is in the best interest of its consumers as this would protect them from potentially higher electricity rates.

Meanwhile, grid operator National Grid Corp. of the Philippines (NGCP) has warned of a thin power supply this summer due to increasing demand this year.

The Department of Energy (DoE) has earlier projected that the Luzon power grid is likely to experience deficient reserves, which may result in 12 yellow alerts, a warning on thinning power buffers.

The DoE said that the Luzon grid is expected to experience a peak demand of 13,125 MW in May.

For the Visayas power grid, peak demand is seen at 2,691 MW in September, and for the Mindanao power grid, the peak is expected at 2,395 MW in June.

“Thin operating margins (power in excess of demand) from where ancillary services (power used to manage and balance the grid) are taken, are forecasted for this year,” NGCP said in a media release.

For the Luzon power grid, the power transmission operator said that the months of April to June are expected to experience thin operating margins. A surge in power demand is expected to happen in summer due to higher temperatures.

“While base case projections show no occurrence of yellow or red alerts, there are weeks between March and April where operating margins are below required levels due to higher demand and planned outages of plants,” NGCP said.

“NGCP coordinates with the generation and distribution sectors to optimize and rationalize maintenance schedules to ensure sufficiency, at least on paper, of power supply throughout the year,” it added.

NGCP noted that unplanned shutdowns outside the grid operating and maintenance program might have an impact on the supply-demand situation.

The grid operator has asked policy makers to explore demand-side management to prevent threats of power shortages.

The DoE has earlier said that red alerts that lead to rotating brownouts are unlikely to happen unless a power plant with a capacity of about 100-200 MW would experience a forced outage.

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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