Manila Elecric Co. said Wednesday consumers may face higher electricity prices next month after it was forced to get supply from the electricity spot market, where prices reached P7 per kilowatt-hour to P9 per kWh.
Meralco said it received a notice of cessation of supply from SMC Global Power Holdings Corp. covering the 670-megawatt power supply agreement with South Premiere Power Corp., which was the subject of the recent 60-day temporary restraining order issued by the Court of Appeals. SPPC supplies 670 MW from the 1,200-MW Ilijan power plant in Batangas.
The CA ruled in favor of SPPC and issued a TRO stopping the Energy Regulatory Commission from implementing its decision which denied the temporary rate hike petition of SPPC and Meralco under their 2019 PSA.
SMCGP asked the ERC for a temporary rate increase, citing gas constraints for the Ilijan plant and an unprecedented increase in coal prices for the 1,200-MW Sual coal plant in Pangasinan under San Miguel Energy Corp.
ERC chairperson Monalisa Dimalanta said it was not yet clear “if SPPC served a notice of PSA termination or merely a suspension of supply considering that the case before the Court of Appeals filed by SPPC involving the said PSA is still for final resolution.”
The ERC also awaits action by the agency’s statutory counsel, the Office of the Solicitor General, after the matter was referred for undertaking the appropriate legal remedy, she said.
“We are exhausting all efforts to mitigate any impact of this recent development on our customers in electricity bills,” Meralco spokesperson Joe Zaldarriaga said.
He said Meralco was negotiating with other generation companies to secure the 670-MW supply and shield the more than 7.5 million customers from volatile and potentially higher WESM prices.
WESM is the trading floor of electricity, where prices are more volatile, especially if supply is tight.
Based on ERC records of Meralco billings for November, the 670-MW SPPC PSA accounted for 13.4 percent of the power retailer’s supply and was priced at P4.2455 per kWh.
The average WESM price for the same period was at P8.47 per kWh. SPPC’s contract with Meralco under the PSA was about P4.30 per kWh.
“The cessation of supply from a bilateral contract or PSA does not excuse the distribution utility from its obligation under Section 23 of Republic Act No. 9136 or EPIRA to supply electricity in the least cost manner to its captive market,” the ERC said in a statement.
Meralco head of utility economics Lawrence Fernandez said he could say yet how much the full impact of the SPPC contract termination would be.
“It really depends on a lot of factors. We still have around two weeks remaining for supply months, and we also don’t know the trend of spot market prices for the coming days,” he said.
He said in the past two days, WESM prices reached P7 to P9 per kWh when the yellow alert was declared in the Luzon grid. “Hopefully, today with the cancellation of the yellow alert, prices will be lower,” Fernandez said.
Zaldarriaga said they were watching the movement of the spot market. “We still need to see other factors that will come into play. So to assume already [it would] redound to higher prices, well, it’s a possibility, but still remains to be seen,” he said.