SMC Global to terminate power supply agreements with MERALCO

ERC – Meralco – SMC

SMC Global Power Holdings Corporation (SMCGP), the power arm of San Miguel Corporation, expressed its intention to terminate two of its power supply agreements (PSAs) with the Manila Electric Co. (MERALCO). 

The termination is SMCGP’s move if the Energy Regulatory Commission (ERC) ignores its petition. It earlier filed for a power rate hike in its PSAs after incurring a Php15 billion loss due to high global prices and natural gas supply restrictions. 

SMCGP president Ramon Ang said that South Premiere Power Corp (SPPC). and San Miguel Energy Corp. (SMEC) had issued notices of termination to MERALCO of the PSAs, citing unexpected and unprecedented “change in circumstance,” 

The termination is effective October 4 should no relief be given to ERC. 

SPPC is the independent power producer (IPP) of the Ilijan plant, is supplying 670MW to MERALCO for 10 years from December 26, 2019, to December 25, 2029. Meanwhile, SMEC is the IPP of the Sual pant and is also supplying 330 MW to MERALCO in the same period.

If the ERC failed to act on SMCGP’s petition and the termination pushes through, electricity prices in Metro Manila and nearby prices may jump by as much as 30% starting October. The company estimated an increase of at least Php 0.80/kWh to Php1.30/kWh in power prices over the next three to four months. 

SMCGP has applied for a Php 0.80 per kilowatt hour (kWh) hike for the 670-MW contracted capacity of the Ilijan plant, going from Php 4.30/kwh to Php 5.10/kWh. It also applied for an average Php4/kWh increase for the 300 MW contracted capacity of the Sual plant, going from Php4.30/kWh to as much as Php8.30/kWh.

Ang said that they are seeking a partial adjustment in the prices to continue supplying to MERALCO and minimize the impact of the PSA termination on industries and consumers. The San Miguel official is hopeful that the ERC “will not merely try to prevent a temporary increase, but will take a whole-of-industry approach. No company or business can sustain operations with these unprecedented and continuing rises in costs.”