ERC clears Meralco-SMC power supply deal

MANILA, Philippines — The Energy Regulatory Commission (ERC) approved Manila Electric Co.’s planned purchase of 1,200-megawatt (MW) baseload supply from an energy unit of San Miguel Corp.

The regulator recently cleared the joint application of Meralco and Excellent Energy Resources Inc. (EERI) for their power supply agreement aimed at ensuring continuous, efficient and reliable electric service to the latter’s consumers.

EERI emerged as the winning bidder during the government-mandated competitive selection process for Meralco’s procurement of baseload power in the next 15 years starting this month.

The applicable rate for the supply contract is P6.0038 per kilowatt hour, which is way lower than EERI’s offered rate of P7.1094 per kWh, according to the ERC.

The commission also noted that the deal’s approval is subject to numerous conditions such as contract term extension concerns, pre-termination of the PSA and pass-through charges, among others.

“Many of those are standard conditions, but we needed to add new ones. Some of which are intended to mitigate the volatility of fuel and freight costs that are passed on to consumers,” ERC chairperson and CEO Monalisa Dimalanta said.

The other condition set for the deal, Dimalanta said, is related to the ongoing review of the Philippine Competition Commission on the proposed changes in the ownership of EERI.

The ERC chief was referring to the $3.3-billion trifecta deal between Meralco PowerGen Corp. (MGen), Aboitiz Power Corp. and San Miguel Global Power Holdings Corp. (SMGP).

The STAR first reported that the deal involves MGen and AboitizPower teaming up to invest in the 1,278-MW Ilijan gas-fired power plant and the new 1,320-MW combined cycle power facility owned by EERI.

Dimalanta said there is a need to “revisit compliance with the market share limitations, bilateral contracting limits, and requirements on distribution utilities engaged in other businesses under EPIRA” since MGen will be part-owner of the gas plants if the transactions are approved.

EPIRA or the Electric Power Industry Reform Act mandates the ERC to ensure “adequate promotion of consumer interests and customer choice; promote competition; encourage market development; and penalize abuse of market power.”

Earlier, the commission granted provisional authority to Meralco, San Miguel-led San Roque Hydropower Inc. and ACEN’s Gigasol3 Inc. for their respective mid-merit supply contracts.

The supply deal covers Meralco’s procurement of a 350-MW mid-merit requirement starting February next year that will increase by 150 MW by February 2026.