Utility firm Manila Electric Co. has refused to burden consumers with the costs from the unilateral suspension of San Miguel Corp.'s power supply agreement and asked the conglomerate to foot the bill.

Brandishing a temporary restraining order, SMC suspended its PSA with Meralco last 6 December which resulted in 670 megawatts in shortfall in the electricity network.

Without an emergency PSA yet, Meralco is sourcing supply from the Wholesale Electricity Spot Market which charges electricity higher than in the PSAs.

Meralco head of regulatory management Jose Ronald Valles wrote South Premiere Power Corp. general manager Elenita Go. for SPPC to shoulder the price difference between the WESM cost and the contract price under their PSA.

Valles said the demand on SMC seeks to offset the impending power price hike throughout the Meralco franchise area as a result of the effectiveness of the temporary restraining order granted by the Court of Appeals to the SPPC.

Meralco's demand for reimbursement will likely be the first of many.

"The claims will be on top of "all applicable fines, penalties and liquidated damages under the PSA (if) the Court of Appeals eventually resolves the main case denying the Petition for Certiorari and/or claim of SPPC," he said.

The PSA has provisions penalizing the unilateral termination through a default provision that will make SMC liable for a total of P255 billion just for the Ilijan PSA.

Aborting PSA entails costs
Meralco earlier noted that the WESM prices ranging from P7 to P9 per kWh are substantially higher than the P4.30 per kWh price under Meralco and SPPC's contract.

The Energy Regulatory Commission also called out the suspension of the PSA, which it said will immediately expose approximately 7.5 million registered Meralco consumers in Metro Manila and Central Luzon and CALABARZON to higher electricity prices.

The regulatory body said the fixed price PSAs have shielded consumers for the past several months from the volatility of costs from the spot market and automatic fuel pass-through PSAs.

The ERC said the cessation of the PSA effectively set aside the required proper observance of the terms of the PSA.

To offset the impact of the PSA cessation, SMC offered the capacity of its Ilijan Plant exclusively to Meralco.

The company said that the offer will only cost Meralco a minimal P1 per kilowatt-hour in capital recovery fee, or half of its capital cost on the facility.

SPPC bought from Psalm the banked gas meant for the Ilijan plant last June for $1.2 billion but First Gas already has the first crack at the Malampaya allocation for this year.

Nonetheless, a Meralco source said aside from the P1 capital recovery fee under the SMC offer, operations and maintenance will be around 30 centavos plus P5 for fuel or P6.30 per kilowatt hour "all in."

SMC, in a separate statement on Monday, said that adding Ilijan 1,200-MW capacity to the Grid will stabilize overall prices.

"With Ilijan operating at full load, the addition of 1,200 MW of baseload capacity to the grid will reduce the overall power supply costs of industrial customers and distribution utilities including Meralco, which source a large portion of their supply from the electricity spot market," SMC said.

"Stabilizing WESM prices will also mean that there will no longer be a pressing need to operate aging diesel plants that act as power reserves, but run at generation costs more than double the cost of coal power, yet deliver poor power quality," it added.