SMC terminates 2 supply deals with Meralco

The 1,800-megawatt power supply agreements between two power units of diversified conglomerate San Miguel Corporation and Manila Electric Company — supposed to take effect next year and the following year — will no longer push through.

The Energy Regulatory Commission confirmed on Friday night that Meralco reached out to inform the power industry watchdog that the SMC units terminated the deals.

“We were just informed by Meralco through SMS that they received today from SMC Excellent Energy and Masinloc Power Partners the Notices of Termination of the PSAs for 1,200MW (EE) and 600MW (MPPCL), respectively,” ERC chairperson Atty. Monalisa Dimalanta said in a text message to the Daily Tribune.

Dimalanta said Meralco informed her office that it will “jointly file with EE and MPPCL the appropriate pleadings with ERC by Monday for the withdrawal of the PSAs.”

The ERC chief, however, clarified that the PSAs were not yet approved by the ERC. Thus, their cancellation will not adversely impact the current supply in the Meralco franchise area.

“ERC will then review and act on such motions, when filed, after determination of compliance with the law and legal processes. We note that no supply is currently being served yet to Meralco from these PSAs,” Dimalanta said.

She also reiterated that the 1,200MW PSA with EE was scheduled to be delivered in December 2024 and the 600-MW PSA with MPPCL was supposed to start in May 2025.

This paper has reached out to SMC for further clarifications but to no avail as of press time.

It can be recalled that SMC Global Power also terminated its 670-MW PSA with Meralco last year due to mounting losses incurred amid sky-high increase in fuel prices.

To partially mitigate the adverse impact of the suspension, Meralco signed an emergency PSA with AboitizPower’s GNPower Dinginin Ltd. for the supply of 300 MW baseload capacity last December 2022 but the deal expired in January.

Meralco is awaiting the approval of power regulators for another round of emergency PSAs with other power suppliers.

Brace for price hike

In a related development, Dimalanta, in a forum last Thursday, warned that power consumers may have to shell out additional pesos in their electricity bills during the upcoming dry season due to threats of rate spikes as demand grows amid thin supply.

“Traditionally, over the years, we have seen that during the summer seasons demand spikes and supply thins so it leads to higher electricity prices,” Dimalanta.

With the skyrocketing power demand, power plant operators tend to use more coal gas due to the absence of cheaper renewable sources like hydropower due to low water levels.

“The tendency is to use more coal, which is more expensive,” she added.

Based on the latest Department of Energy data, the total peak demand for Luzon may reach 13,125 megawatts by the end of May, representing an 8.35 percent increase from the actual peak load of 12,113MW on 12 May 2022.

Meanwhile, the peak demand in Visayas is expected to hit 2,691 MW, which is higher by 16.19 percent from the peak load recorded in September last year at 2,316 MW.

In Mindanao, the peak load is likely to clock in at 2,395 MW, up 10.52 percent from the 2,167 MW peak in June 2022.

Meanwhile, Energy Assistant Secretary Mario Marasigan assured consumers that the power supply remains sufficient to provide the needs of all consumers.

“Our electricity supply will not be lacking starting this month and even in the height of May. It’s just that our reserves are thin,” Marasigan said during a public briefing hosted by state-run PTV 4 on Thursday.

Marasigan, however, noted that once a power plant fails, yellow and/or red alerts will be immediately raised, and that may lead to power interruptions — an inconvenient occurrence during summer when the weather is much warmer.

A yellow alert is issued when the operating margin is insufficient to meet the transmission grid’s regulating and contingency requirement, which is at 668 megawatts each.

A red alert status is issued when supplies are insufficient to meet consumer demand and the transmission grid’s regulating requirement.

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