ERC to Meralco, SMC powerunits: Don’t end PSAs yet

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THE Energy Regulatory Commission (ERC) has ordered the Manila Electric Company (Meralco) and two units of San Miguel Global Power Holdings Corp. to not terminate their power supply agreements (PSAs) until the parties can fully comply with the ERC rules and until the agency has acted on their joint application.

“The applicants are reminded to refrain from taking any action implementing any termination until the Commission has acted on any appropriate pleading that may be filed by the applicants seeking specific reliefs relative to the notice of termination,” said the ERC in its seven-page order promulgated last March 30 and posted on its website on Monday.

The PSA between Meralco and Excellent Energy Resources Inc. (EERI) involving 1,200 megawatts (MW) of gas-generated capacity starting December 2024 and another PSA between Meralco and Masinloc Power Partners Co. Ltd. involving 600MW of capacity for delivery starting May 2025 were terminated on the ground that the longstop dates lapsed on September 23, 2021 and September 17, 2021, respectively.

The longstop date exists in all PSAs. This serves as a security for all power generators. It is a period in which the ERC is supposed to approve or disapprove the application of the distribution utility and the power supplier for the implementation of their PSA. Once the longstop date is over, the power supplier has the right to terminate the PSA by providing a written notice of such termination to the DU. Neither any of them shall be held liable.

Based on ERC records, the longstop dates for both PSAs have lapsed and the ERC has not issued a final approval on their joint applications seeking approval of their PSAs. Meralco and EERI filed their joint application last March 24, 2021; the joint application of Meralco and MPPCL was filed on March 18, 2021.

Meralco received the notice of termination from San Miguel Global Power on March 17, 2023. The PSAs were supposed to be terminated starting April 1.

Based on ERC records, Meralco filed an “urgent manifestation” on March 20.

The Commission finds that Meralco, after having received the notice of termination, did not provide any information in the instant urgent manifestation on whether it had accepted or disputed the notice of termination; any extensions or requests for extension of the longstop date provided under the PSA; any event or action that occurred prompting EERI or MPPCL to issue such notice of termination; any other actions or measures of due diligence Meralco had conducted upon receiving the notice of termination.

“The Commission must emphasize that the urgent manifestation did not contain any prayer for relief from the Commission. Should the applicants seek any specific relief from the commission, they may file a joint motion pursuant to pertinent provisions of the Revised Rules of Practice and Procedure [RRPP] of the commission. Otherwise, the commission shall proceed with its evaluation of the joint application in due course,” the ERC said.

The agency reminded Meralco, EERI, and MPPCL that any termination of PSA, which the ERC said is “a contract imbued with public interest,” could not take effect without its prior approval.

While the ERC took note of the Meralco’s urgent manifestation, the utility firm was directed to submit within 15 days from receipt of the ERC order the various information that are necessary to support the urgent manifestation.

Moreover, the ERC told Meralco, EERI, and MPPCL to be guided by the agency’s RRPP in its consideration of appropriate pleadings that they might want to pursue relative to the notice of termination and joint application.

When Meralco received the notice of termination, it said that it will exhaust all options in order to replace the capacity under the terminated PSAs that underwent competitive selection process (CSP) in February 2021.

Meanwhile, Meralco said it has secured commitment for additional de-loading capacity under the Interruptible Load Program (ILP) in preparation for the summer months when electricity demand peaks.

Meralco said it is set to gain an additional 56MW of de-loading capacity, as pledged by Ayala Property Management Corporation (APMC). This would bring the real estate firm’s total commitment to 144 MW from 88 MW and expand the distribution utility’s ILP capacity to 616 MW from 560 MW currently.

The ILP is an energy demand-side management program through which large-load customers are asked to use their generator sets or reduce their operations, instead of drawing power from the grid, to spare households from power interruptions during instances of Red Alert or when supply is insufficient to meet the demand.

At present, 117 companies across the Meralco franchise area are part of the ILP.

“Electricity consumption historically rises during the dry months because of the increased use of cooling appliances. That’s why we, in Meralco, continue to share a wealth of energy efficiency tips, not only to help our customers better manage their power consumption, but also to encourage its adoption as a way of life,” Meralco Spokesperson and First Vice President for Corporate Communications Joe Zaldarriaga said.

Meralco, in coordination with the Department of Energy and industry stakeholders, assures its 7.6 million customers of its relentless efforts to deliver sufficient, reliable, and stable electricity service not just during the dry months but all year long.