The MANILA Electric Co. (Meralco) said over the weekend that it did not receive an offer from Aboitiz-led GNPower Dinginin Ltd. (GNPD) to extend their emergency power supply agreement (EPSA).
With this, the utility firm has started soliciting offers from other power suppliers to replace the contract capacity from South Premiere Power Corp. (SPPC).
“They did not offer to extend the EPSA with Meralco, but Meralco has sought other offers from other suppliers and this have been submitted to the DOE [Department of Energy] for consideration and approval,” said Meralco utility economics head Lawrence Fernandez.
It can be recalled that Meralco signed a 300-MW baseload EPSA with GNPD to partially replace the 670MW power supply agreement (PSA) with San Miguel Corp.’s SPPC. The EPSA, which has a rate of P5.96 per kWh, took effect on December 15, 2022 and ended on January 25, 2023.
The EPSA was extended for another 30 days from January 26 to February 25. However, the rate for the second round of EPSA was much higher at P8.522 per kWh.
Last month, Meralco requested GNPD for an extension of the EPSA albeit at a much lower rate.
When asked why Meralco agreed to a much higher rate for the second EPSA, Meralco First Vice President Jose Ronald Valles explained that SPPC has no rate offer yet at that time and that the negotiations for an EPSA extension took place before the grant of the Writ of Preliminary Injunction (WPI) sought by SPPC.
“Our comparison is between GNPD and WESM since there were no other suppliers willing to supply to Meralco for that period. Before we signed the EPSA extension with GNPD, our forecast of WESM [Wholesale Electricity Spot Market] price is higher than GNPD’s offered tariff… The rate of P8.50/kwh is just an indicative rate of GNPD considering fuel is full pass thru.
The actual rate implemented may be different depending on their actual fuel costs and foreign exchange in February supply month. Of course, actual WESM price may change depending also on demand and availability of supply. What we did was to contract 300MW of GNPD at a rate we assumed was going to be lower than WESM price to protect our customers against price volatility in WESM. That rate is still subject to ERC approval,” he said.
The grant of WPI suspended the continued implementation of Meralco-SPPC PSA but does not terminate the same. The Court of Appeals directed the parties “to enter into good faith negotiations,” to allow them to negotiate the terms of the PSA. When asked if Meralco has commenced negotiations with SPPC following the issuance of the WPI, Valles said “a letter to negotiate for lower SPPC rate as directed by the CA” was already sent to SPPC.
Last week, Meralco announced an increase in power rates this month by P0.5453 per kilowatt hour (kWh), bringing overall rate for a typical household to P11.4348 per kWh from the previous month’s P10.8895 per kWh. The adjustment, Meralco said, is equivalent to an increase of around P109 in the total electricity bill of residential customers consuming 200 kWh.
The rate increase for March was brought about by higher generation charge that went up by P0.4636 to P7.3790 from P6.9154 per kWh the previous month due to higher supply costs.
“This month’s generation charge increase would have been significantly higher, but we took the initiative to cushion the impact in the bills of our customers by coordinating with some of our suppliers to defer collection of portions of their generation costs,” Valles said.
Valles added that a total of around P1.1 billion deferred costs reduced this month’s generation rate by about P0.40 per kWh and will be billed on a staggered basis in April and May billing months.