The double whammy of the Eastern European conflict and the effects of the stubborn pandemic have been blamed for the sudden upswing recently in fuel prices including coal.
Also, the supply from the Malampaya natural gas field is fast running out due to the absence of rehabilitation and new exploration projects.
With the persisting Ukraine-Russia standoff, there are no immediate expectations that high prices of fuel will ease.
While it is within reason that independent power producers are expected to seek rates increases from the Energy Regulatory Commission amid the elevated prices, the nature of the Power Supply Agreement provides only for a fixed rate that Meralco pays power suppliers.
Conglomerate San Miguel Corp., which is shifting to hard industries, wants to recover P5.2 billion to be charged to consumers over six months.
It also seeks an amendment to its PSAs to collect an additional P4 per kilowatt hour for the Sual Coal operated by San Miguel Energy Corp. and the South Premier Power Corp.-operated Ilijan plant.
Acting on the rate hike petition filed by SMC Global Power Holdings Corp., parent of both SMC generation companies, to the ERC will be detrimental and unfair to power consumers, a consumer group warned.
“SMC should absorb the alleged losses because the PSA they were referring to in their petition was approved by the Energy Regulatory Commission. Thus, it does not allow price adjustment,” National Association of Electricity Consumers for Reform Inc. president Pete Ilagan said in an interview.
Ilagan added the ERC, now headed by lawyer Monalisa Dimalanta should dismiss the motion of the Ramon S. Ang-led company or else it will only give “undue advantage to SMC” to the “detriment of electricity consumers.”
According to Ang, SMC president and chief executive officer, the petition will provide “temporary and equitable relief, to allow the power facilities to survive this difficult period and continue supplying power to Meralco.”
Thus, the subtle reminder is that its supply of electricity to Meralco from its high-capacity power plants may stop if it fails to secure the rates adjustments it has been working for.
SMC claims minimal impact
Particularly, SMCGP asked for ERC’s nod for a rate increase from January to May, of P0.80 per kilowatt hour or from P4.30 to P5.10 per kWh for its 670 megawatts of contracted baseload capacity from the Ilijan natural gas plant and an average of P4/kWh (from P4.3 to 8.3/kwh) for the 330 MW contracted baseload capacity from the Sual Plant.
Overall, the company wanted to recover P5.2 billion in losses from January to May.
The net rate impact however to Meralco, assuming that this cost recovery claim is granted by the ERC, is just P0.28/kwh for six months.
According to SMCGP, the “questionable and unilateral notices of gas restrictions which caused the deration or the ceasing of delivery of available capacity” affected the Ilijan natural gas plant’s net generation capacity. It was forced to source costly replacement fuel from the Wholesale Electricity Spot Market.
Temporary hike
Early this month, SMCGP reported that its Sual Coal and Ilijan Natural Gas power facilities logged combined losses of P15 billion from 2021 to date due to high global coal prices and unilateral natural gas supply restrictions from Malampaya.
As such, it sought a temporary and partial cost recovery relief only for the losses it incurred from January to May, through a power rate increase on its contract capacity under the PSAs to be amortized for six months.
While this will result in a temporary increase in prices, the grid would continue to have an adequate supply of reliable base load power to keep the lights on for the millions of individual consumers, households and industrial facilities.