ERC approves SMC, Meralco supply contracts

MANILA, Philippines - The Energy Regulatory Commission (ERC) has approved two power supply contracts involving conglomerate San Miguel Corp. (SMC) and Manila Electric Co. (Meralco).

In a public notice, the power sector regulator said it provisionally approved the contract for the supply of electricity (CSE) between Meralco and Pangea Green Energy Philippines Inc.

It also allowed San Miguel Energy Corp. (SMEC) to implement an interim power supply agreement (PSA) with Cagayan I Electric Cooperative Inc. (Cagelco I).

“There is a need to immediately implement the CSE in order to encourage and stimulate the development of emerging renewable energy resources in the country,” Meralco and Pangea said in their application.

Meralco is the country’s largest power distributor, with consolidated customer accounts of 5.16 million as of end-September. Its franchise area covers Metro Manila, Laguna, Cavite and Pampanga, Rizal, Bulacan and Batangas.

Pangea, for its part, owns a 1.2-megawatt (MW) power plant that sources its fuel from methane extracted from the Payatas landfill in Quezon City.

Meralco customers are expected to enjoy lower rates from the CSE. For instance, National Power Corp. (Napocor) effective rate for July is at P5.67 per kilowatt-hour (kWh) but prices under the CSE is only P4.38 per kWh.

“It partly reduces Meralco’s dependence on the (electricity spot market), thereby, protecting its customers from its price volatility,” Meralco said.

Pangea’s power plant is embedded to the distribution system of Meralco. The electricity generated will be delivered directly through Meralco’s Diliman substation.

“An initial evaluation of the CSE between Meralco and Pangea discloses that the proposed rates therein are reasonable and will redound to the benefit of Meralco’s customers since the said rates are lower than Napocor’s effective rate for the Luzon grid,” ERC said.

Meanwhile, ERC-approved power supply deal between SMEC and Cagelco I will also result in lower electricity costs.

Based on March 2012 data, PSA rates are cheaper at P4.7131 per kWh compared with the existing rate of P4.9858 per kwh.

To date, Cagelco I sources bulk of its power supply from SN Aboitiz Power-Magat Inc. (SNAP-Magat) under a three-year PSA.

Cagelco I has entered into a 15-year power supply deal with GNPower Ltd. Co. The 600-MW power plant was earlier scheduled to start operations in January 2012 but it was pushed back to December 2012.

“Due to the delay in the commercial operation of GNPower’s coal plant, it had to look for replacement power to bridge the gap in its contracted power supply from the time the PSA with SNAP-Magat expires on July 25, 2012 until the commercial operation of GNPower’s coal plant on Dec. 26, 2012,” Cagelco I said.