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San Miguel ends power supply deal with Meralco

San Miguel ends power supply deal with Meralco

San Miguel Corporation (SMC) on Tuesday said that its power unit San Miguel Global Power (SMGP) is ceasing its 670-megawatt (MW) power supply agreement (PSA) with Manila Electric Co. (Meralco) effective Wednesday, December 7, 2022.

SMC made the announcement weeks after the Court of Appeals (CA) issued a temporary restraining order (TRO) suspending the PSA between SMGP’s South Premier Power Corp. (SPPC) and Meralco for 60 days. 

SMC president and CEO Ramon Ang said that SMGP did not want to terminate the PSA, “that was why it was seeking just a temporary, six-month relief.”

“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,” said Ang.

The CA’s decision stemmed from SPPC’s petition asking for temporary relief after the Energy Regulatory Commission (ERC) rejected its pleas together with San Miguel Energy Corp., and Meralco to hike generation charge amid higher prices for coal and natural gas materials used to produce electricity.

The ERC, however, said that the agreed price in the PSA is fixed by nature and the grounds for increase cited by SPPC and Meralco were not among the exceptions that would allow for price adjustment.

“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,” said Ang.

Despite the cessation of supply of the contract capacity, SMGP will still continue to offer its available and uncontracted capacity to qualified off takers and to the spot market.

SMGP is also offering to make the entire 1,200-MW capacity of the Ilijan Plant available to Meralco at a capital recovery fee of only P1 per kilowatt-hour (kWh).

In a chance interview with reporters, Meralco head of regulatory management Jose Ronald Valles said the company is studying the proposal of SMGP.

“We are still running the numbers. The impact of the prices to consumers, the rates,” Valles said.

Valles added that Meralco is “doing everything possible to mitigate the impact of TRO, as well as the impact of any increases that will be brought about by the price offers of the different generators under emergency PSAs.”

President Ferdinand Marcos Jr. also said that his administration is working at preventing the potential hike in power prices following the CA decision. —LDF, GMA Integrated News