SMC drops power service deal with Meralco

San Miguel Global Power, a unit of conglomerate San Miguel Corp. (SMC) officially sent word it is suspending its 670-megawatt power supply agreement (PSA) with Manila Electric Co. (Meralco) starting 7 December.

SMC is apparently banking on the Court of Appeal's issuance of a 60-day temporary restraining order (TRO) against the Energy Regulatory Commission's (ERC) denial of its joint power rate hike petition with Meralco.

In a press statement on 6 December, SMC president and CEO Ramon S. Ang reiterated the company did not want to terminate the PSA, which was why it sought for just a temporary six-month relief.

But ERC denied the petition.

Ang pointed out the right to unilaterally terminate its PSA is allowed under the agreement itself, as part of necessary mitigation measures under the long-term, fixed rate supply deal, particularly in the event of a "change in circumstances."

To offset the impact of the PSA suspension, SMC has offered the 1,200-MW capacity of its Ilijan Plant exclusively to Meralco.

Ang said that the offer will cost Meralco a minimal P1 per kilowatt-hour in capital recovery fee, or half of its capital cost on the facility. The supply coming from the Ilijan Plant accounts for around 10 to 12 percent of Luzon's net dependable capacity.

Ang said that SMGP, through subsidiary South Premiere Power Corp., already had initial discussions with Meralco, as both firms are committed to helping consumers weather rising commodity prices, including that of power.

Meanwhile, Meralco, the country's largest power distributor, confirmed it is exploring SMCs offer to stabilize power supply and cost within its franchise area.

In a chance interview on 6 December, Meralco head of Regulatory Management lawyer Jose Ronald V. Valles said the company is currently looking for additional capacity to cover the months when supply is low, that's why it is "interested in exploring SMC's new offer."