Meralco to sign new PSAs with SMC, Ayala

Published September 11, 2019, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2019/09/11/meralco-to-sign-new-psas-with-smc-ayala/

Power utility giant Manila Electric Company (Meralco) will sign three new power supply agreements (PSAs) this Friday, August 13, with the energy companies of San Miguel Corporation (SMC) and AC Energy of the Ayala group.

The PSAs to be underwritten will be for 10 years or from December 26, 2019 to December 25, 2029 – and based on the outcome of the competitive selection process (CSP) that the utility firm had carried out last Monday, September 9, for its supply portfolio that must start delivery by year-end.

The contracts will have to be inked with South Premiere Power Corporation and San Miguel Energy Corporation of the SMC group; and with PHINMA Energy Corporation for the capacity won by the Ayala group.

Following the signing of the supply deals, the parties-in-interest will need to go through joint filing of their PSAs to secure the nod of the Energy Regulatory Commission (ERC) on their pass-on rates.

The total volume under this round of procurement had been for 1,200MW of brownfield capacity – meaning, the supply has to be delivered by plants that are already existing and operating.

Once wheeled to its load network, Meralco estimated that its customers would be able to benefit total reduction of P9.46 billion on yearly pass-on costs, primarily the generation charge component of the rates reflected in the electric bills.

“The resulting prices from the CSP are significantly lower than their average generation cost today of around P5.88 per kilowatt-hour (VAT inclusive),” Meralco said.

It further noted that “Meralco consumers are expected to save around P0.28 per kWh or P9.46 billion annually for 10 years from the new PSAs to be executed with the winning power suppliers.”

As of press time, Meralco is also undergoing another round of CSP for its need for peaking and mid-range capacity for a total volume of 500MW.

On the initial 1,200MW that had already successfully hurdled CSP, the utility firm explained that the all-in rate as offered and to be firmly underwritten in the PSAs, already ropes in “line rental and VAT (value-added tax), and the cost of replacement power for all plant outages.”

It further emphasized that “the generator-companies will also be liable to pay a fine if they are unable to deliver power, which will be used to reduce the generation cost to the consumers.”

The bidding for the 1,200MW brownfield capacity was witnessed by representatives from the Department of Energy (DOE) and was attended by several generation companies, according to Meralco.