Manila Electric Co. (Meralco) said it has secured more than P4.2 billion in customer savings after renegotiating the latest extension of its power supply agreement with the First Gas Santa Rita plant.

The extension followed a 10 June directive from the Department of Energy (DOE) ordering Meralco and First Gas Power Corp. (FGPC) to immediately extend the power supply agreement until 25 December.

The DOE described Santa Rita as "among the most critically needed generation assets in the Luzon Grid" that has "consistently and reliably supported grid stability across successive PPA extensions."

Rather than simply renewing the contract, Meralco reopened negotiations to secure better commercial terms for consumers.

"So, as a result of this letter, we immediately sat down with First Gas to negotiate for better terms," Meralco Senior Vice President and Head of Regulatory Management Jose Ronald V. Valles said in an interview with reporters on Wednesday. 

The negotiations resulted in a P50-million monthly discount on non-fuel charges, translating to P300 million in savings from July to December.

First Gas also agreed to cap line rental charges at P0.15 per kilowatt-hour, with costs exceeding P25 million per billing period to be absorbed by the generator instead of customers, generating another P150 million in savings.

The revised agreement further cushions consumers from foreign exchange volatility by capping the peso conversion rate for the dollar-denominated portions of non-fuel charges—including capacity reservation fees and operation and maintenance costs—at P62 to the dollar, with First Gas assuming any exchange rate losses beyond that level.

Altogether, the revised commercial terms will reduce customer costs by around P450 million during the six-month extension.

The savings become even more significant once Malampaya natural gas begins supplying the 1,200-megawatt Ilijan power plant in September, expected to generate more than P3.8 billion in fuel cost savings, equivalent to an average reduction of P0.36 per kilowatt-hour in electricity rates.