SMC Global Power Holdings Corporation (SMCGP), the energy arm of San Miguel Corporation, will be terminating its power supply agreement (PSA) with the Manila Electric Co. (MERALCO) covering the 670 megawatt (MW) supply from the Ilijan gas-fired power plant.
SMCGP has notified MERALCO that it will be ceasing its supply to MERALCO effective today, December 7.
The SMC firm said the company took this step following the issuance of the temporary restraining order (TRO) by the Court of Appeals (CA) that suspends Energy Regulatory Commission’s (ERC) denial of the rate hike being sought by the two companies.
SMC president and CEO Ramon Ang said that SMCGP “did not want to have to terminate the PSA, and that was why it was seeking just a temporary, six-month relief.”
South Premiere Power Corp. (SPPC), the independent power producer of the Ilijan plant, was forced to source its capacity from the Wholesale Electricity Spot Market (WESM), “which triggered higher price spikes, further affecting the company’s costs to supply MERALCO.”
Ang said that the SMC firm has been transparent with ERC, adding that they were not asking for a permanent increase, and they did not want to be relieved of their contractual commitments. Instead, the company was seeking for “temporary, equitable relief, given the undeniable and unforeseen circumstances that affect not just us, but all Filipinos and many economies worldwide.”
SMC stressed that the right to “unilaterally terminate is allowed” under the PSA, as part of the necessary mitigation measures under the long-term, fixed-rate supply deal, particularly in the event of a ‘change of circumstances.”
Despite the termination of the PSA, San Miguel stressed that this will have no impact on the current level of system supply as the company will continue to offer its available and uncontracted capacity to qualified off-takers and to the spot market.
MERALCO, meanwhile, will source supply from the WESM as it has not yet received approval on its emergency PSAs from the DOE.