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ERC denies Meralco bid to extend supply deal

 

THE Energy Regulatory Commission (ERC) has rejected Manila Electric Co.’s (Meralco) application to extend its supply deal with a unit of AboitizPower Corp. until December 2022.

In its order, the regulator resolved to deny the motion to extend the power supply agreement (PSA) of Meralco with Therma Luzon Inc. (TLI), a wholly owned subsidiary of Therma Power, Inc. (TPI). TPI is the holding company for AboitizPower’s non-renewable energy projects.

The ERC said in its September 11, 2019 ruling that the listed firm should comply with the Department of Energy’s (DoE) circular promulgated in 2018 wherein a distribution utility (DU) must procure power supply through the competitive selection process (CSP) except in case of emergency power supply.



The circular defines emergency power as the “power required by the DU in the event that a DU’s actual power supply falls below its load demand due to force majeure and fortuitous events or other analogus circumstances that are beyond the control of the DU and such shortfall cannot be addressed through any reasonable means within a month, subject to the final determination by the DoE.”

Meralco, however, failed “to allege and substantiate that its situation falls under the aforecited exemption.”

The ERC also cited the Supreme Court’s ruling in May that all PSA applications submitted to the ERC on or after June 30, 2015 must undergo CSP, designed to protect consumers, and rules under them require DUs to get at least two offers for power supply before awarding a deal, ensuring that consumers get the least cost.

The high tribunal’s ruling also nullified the ERC resolution wherein PSAs may be automatically extended for one year.

According to the agency, extension of the term is not consistent with Section 2.2.3 of the approved supply deal, which states that the parties shall enter into good faith negotiations to decide whether or not to extend the accord after the 5th anniversary of the operations effective date.

Citing records, the ERC stated the petition was filed on May 6, 2019, or barely three years and five months from the operations effective date on December 26, 2012.

On December 17, 2012, the regulator approved with modification the PSA between Meralco and TLI. It covers 350 megawatts (MW) from TLI’s 700-MW coal-fired power generating capacity in Pagbilao, Quezon.

Meralco shares dropped by P3 or 0.89 percent to close at P335 apiece on Monday.

 

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