A high official of Energy Regulatory Commission (ERC) told reporters that Millennium Energy Inc. has met with the commission in an effort to resolve a dispute over a power supply agreement with distributor Manila Electric Co (Meralco).
“We have met with Millennium because they have a problem with Meralco regarding its Distribution Wheeling Services Agreement (DWSA) with them,” ERC Chairman and CEO Jose Vicente Salazar told reporters in an interview.
Millennium Energy owns the two-unit 310-MW Navotas gas turbine power plant at the Navotas fish port, and the 620-MW Bataan combined cycle power plant in Limay, Bataan.
They are disadvantaged because of the exorbitant rates Meralco is imposing under the DWSA, Millennium told ERC Chairman Salazar during their meeting.
‘Wheeling’ is when a distributor transfers or allows the transfer of electricity over its network from a generator to a different customer. The DWSA is critical to the Navotas plant in particular, as it is connected only to the Meralco distribution grid and not the national grid as of yet.
“That is crucial because that Millennium is embedded with Meralco for distribution. For example, if Millennium has a contract with a distribution utility (DU) outside the Meralco area, they will need to pay again,” he said.
“This is one thing that is crucial with the agreement, [Millennium] still needs to pay despite the fact it did not win in the market. It is like a highway for which you need to pay the toll even though you did not use it, and it is based on the capacity that you can actually offer to the market. Millennium is losing a lot of money,” he added.
As a result, both parties are fighting. Millennium rescinded their contract and refused to pay because they deem the contract unreasonable.
“However, since they have the capacity of 100MW, Millennium is obliged to offer this especially in the summer months. If they cannot dispatch it, then they will be held liable under Philippine Electricity Market Corporation (PEMC) rules, because [when]there is a capacity but you did not offer, it has effect on price,” Salazar said.
On the part of ERC, Salazar stressed the regulator needs to resolve the situation because it has an adverse effect on prices. However, ERC is still weighing the situation for both parties.
Salazar said that Millennium questioned, “Why would we do business if we’re losing money and the distribution wheeling charges is too much for us to handle?”
“On the other hand, Meralco could then question why Millennium signed the contract in the first place,” Salazar said.
“It [Meralco] needs to procure from the Wholesale Electricity Spot Market (WESM). That’s the question, San Miguel Corporation [owner of Millennium]wrote a letter to PEMC, it say they will not supply anymore,” Salazar said.
In term of resolving the situation, Salazar said, “That is something which you can ask the market, what is going to be your next move, considering there is a need for us to increase capacity since it’s summer.”