The Energy Regulatory Commission (ERC) has approved a one-time extension of the power supply deal between the Manila Electric Company (Meralco) and First Gas Power Corporation (FGPC) for the Sta. Rita natural gas plant in Batangas. The interim extension runs until January 31, 2026, and is aimed at ensuring steady gas supply from Malampaya and protecting Luzon’s power grid.

The original Power Purchase Agreement (PPA), first signed in 1997, expired on August 28, 2025. Without an extension, FGPC warned that the 1,000-megawatt Sta. Rita plant would be forced to shut down. This could have disrupted the continuous flow and economic viability of the Malampaya gas supply, which depends on stable demand from plants like Sta. Rita. The ERC noted that losing Sta. Rita would pose serious risks to gas supply continuity and overall grid reliability.

Meralco said the shutdown could have also triggered yellow and red alerts on the grid, which signal thin power reserves and possible outages. While the extension may cause a small increase in generation charges, the utility stressed that the costs are outweighed by the need to keep supply reliable.

ERC Chairperson Francis Saturnino Juan said the Commission granted the extension “pro hac vice,” meaning it applies only for this particular case and cannot be used as a precedent for future extensions. The approval comes with strict conditions: Sta. Rita may only run at its minimum output level, Meralco must follow its other supply contracts, and the rates will be based on the Commission’s previously approved levels.

The Department of Energy (DOE) confirmed there is no legal barrier to the extension. In a letter dated August 27, DOE Secretary Sharon Garin explained that since the Sta. Rita contract was approved before the Electric Power Industry Reform Act (EPIRA) in 2001, but it is not covered by current competitive bidding rules. However, she also directed Meralco to review its procurement plan to avoid overcontracting and unnecessary costs for consumers.

ERC also asked the Independent Electricity Market Operator of the Philippines (IEMOP) to simulate the impact if Sta. Rita were treated as a merchant plant, selling directly to the spot market instead of under a contract. The study showed that while prices with the PPA in place averaged around PHP3.08 per kWh, spot prices could rise to between PHP3.60 and PHP6.23 per kWh under different scenarios, with worst cases reaching up to PHP20 per kWh. ERC said these findings prove that losing Sta. Rita would cause higher electricity prices and risk nationwide blackouts.

The Commission concluded that approving the interim extension was necessary to balance consumer protection with the larger goal of energy security. The order was signed by the ERC’s chairperson and four commissioners during its meeting on August 27, 2025.

Do you think the government should prioritize keeping gas plants like Sta. Rita online, even if it means slightly higher costs for consumers?

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