This followed the power distributor’s receipt of the Department of Energy’s (DOE) certification exempting the EPSA from Competitive Selection Process (CSP), thereby allowing its immediate implementation. 

The EPSA reflects a two-part tariff composed of a PhP1.75 per kWh fixed cost and variable cost indexed on fuel price movements.  

This partially replaces the capacity covered by Meralco’s 2019 PSA with SPPC, which was subjected to a Writ of Preliminary Injunction issued by the Court of Appeals. 

The execution of the EPSA will help shield electricity consumers from volatile and potentially higher generation costs in the Wholesale Electricity Spot Market, which is historically recorded during the dry season when power demand spikes. 

Meralco also sought the DOE’s approval for another EPSA for its 180-MW baseload capacity requirement meant to boost available supply and help address the reduced capacity of natural gas-fired power plants affected by the continued Malampaya gas supply restriction. 

The 180-MW supply was originally subjected to two rounds of CSPs, which both failed due to lack of bidders. Given the urgency of the additional supply for the dry season, Meralco sought approval to execute an EPSA instead. 

Meralco remains committed to its mandate to deliver stable, reliable, and least-cost supply to its 7.6 million customers and unceasingly works to mitigate any impact of challenging circumstances on its power rates.

In its motion dated December 19, Meralco cited the disruption of basic and essential services being rendered by SPPC, contrary to the objective of the TRO, and to the detriment of millions of Filipinos served by the power distributor.

“With due respect, the grant of the TRO was not in furtherance of the ‘interest of the general public’,” Meralco said.

The TRO led to the cessation of 670 MW supply that SPPC was obligated to deliver under its Power Supply Agreement (PSA), which has a lower rate compared to the Wholesale Electricity Spot Market (WESM) and the Emergency Power Supply Agreement (EPSA) where Meralco currently sources the replacement power.

Meralco added that the “Honorable Court should lift the TRO and direct for the parties to continuously implement the PSA in order to bring back the scenario that would serve and protect the public from the unnecessary burden of increased electricity costs.”

Meralco also emphasized that Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA) expressly states that supply sector is a business affected by public interest, and therefore SPPC’s rights and interests “must give way to serve a higher end for the interest of the public.”

In opposing the injunctive relief sought by SPPC, Meralco said it intends “to protect the public and in accordance with its obligation to provide its customers with the least cost of electricity.”

The motion it filed is based on the following grounds:

(i) The injunctive relief reverses the status quo ante instead of preserving it contrary to its principal purpose of preserving the rights of the parties;

(ii) The grant of the TRO/WPI will render the main case moot and academic contrary to established jurisprudence;

(iii) The grant of the TRO/WPI will result in a pre-judgment of the main case which is prohibited by Supreme Court decisions;

(iv) The TRO and WPI are improper remedies since these are inconsistent with the ultimate relief being sought by SPPC which is the approval of the application for price adjustment it had filed with the ERC for the period January to May 2022;

(v) The grant of the TRO/WPI will cause prejudice to the consumers contrary to EPIRA and the intention of the Court of Appeals as expressed in its decision on the issuance of the TRO;

(vi) SPPC has no clear legal right to the grant of the TRO and issuance of the WPI since its right to the price adjustment is in contention and the principal issue of the main case; and

(vii) SPPC failed to demonstrate that it will suffer grave and irreparable injury if the injunctive reliefs are not granted since the “damage” claimed by SPPC, by its own admission, is clearly measurable or capable of arithmetic calculation for the period covered by the application for price adjustment or from January to May 2022.

Meralco assures all its stakeholders that it is exhausting all measures to continue delivering sufficient, reliable and least cost power to its 7.6 million customers.

While the Consortium sought to communicate, among other things, that there is no “live contract” for Malampaya gas between SPPC and the Consortium, the facts of the issue stand:

SPPC bought the Malampaya banked gas owned by the government through PNOC for US$1.2 billion

⁃     SPPC signed a Gas Supply and Purchase Agreement (GSPA) worth P1.2 billion with PNOC for such banked gas last June 23, 2022, under the direct supervision of the Department of Energy (DoE), the PNOC Board, and the Office of the Government Corporate Counsel (OGCC). Government, through PNOC, owns and exercises rights over 70.26PJ banked gas.

⁃     While SPPC does not have a direct agreement with the Consortium, it is PNOC on behalf of government that has an existing contract with SPPC. In fact, in our discussions for the sale of the banked gas, PNOC disclosed to SPPC that the government has fully paid the Consortium for the gas, which means that 100% of the gas should be deliverable to SPPC.

The SPPC-PNOC agreement is more advantageous to government

⁃     With gas volumes from Malampaya on the decline, the prioritization of the SPPC and PNOC contract over the banked gas is widely considered to be more advantageous to government, as it was bought by SPPC at a significantly higher contract price compared to those of existing gas supply agreements from Malampaya with another power company.

Delivering the purchased gas supply to Ilijan will benefit consumers and reintegrate 1200 MW of baseload capacity to the grid

⁃     Reintegrating Ilijan into the Grid using Malampaya gas supply will immediately add 1,200 MW of baseload capacity, helping stabilize power supply and prices. Historically, Ilijan contributes up to 10% of the net reliable capacity in Luzon. However, since Ilijan was cut off from Malampaya supply last June 2022, the system demand and supply situation has been very fragile with elevated and volatile electricity spot prices. From June to November 2022, electricity spot market prices averaged P8.67/kwh compared to only P4.31/kwh for the same period over the past three years. Compounding the problem is the exponential growth of demand over the past two years, which is seen to create a massive supply deficit by summer 2023. With no new major baseload capacities expected in the coming months, it is crucial for government to reintegrate Ilijan’s 1,200 MW capacity into the Grid in the interest of energy security.

Adding Ilijan’s 1,200 MW to the Grid will stabilize overall prices

⁃     With Ilijan operating at full load, the addition of 1,200 MW of baseload capacity to the grid will reduce the overall power supply costs of industrial customers and distribution utilities including MERALCO, that source a large portion of their supply from the electricity spot market (or WESM). Stabilizing WESM prices will also mean that there will no longer be a pressing need to operate aging diesel plants that act as power reserves, but run at generation costs more than double the cost of coal power, yet deliver poor power quality.

⁃     Should the Malampaya supply be delivered to Ilijan, other affected power facilities can alternatively use condensate fuel, as allowed under their PSAs with Meralco. This will avoid disruptions to the energy trading market. Any increase in power supply costs will only affect the pertinent contract capacities using condensate fuel.

The SPPC- PNOC contract is the true win-win solution for all stakeholders

The SPPC and PNOC contract is the true win-win solution, not just for players in the Malampaya business supply chain, but all stakeholders–especially consumers. Also, PNOC owns 70.26 PJ of banked gas, which it sold to SPPC for $1.2B or $18/MMbtu compared to competing gas supply contracts that are believed to be priced significantly lower from the government’s perspective. By preventing or limiting the utilization of the banked gas, PNOC will not be able to fully monetize, if at all, this government asset valued at $1.2B before the end of the concession in 2024 as the gas volumes extracted from Malampaya continue to rapidly decline.

The Third-Party Bids and Awards Committee (TPBAC) overseeing the CSP declared SPPC’s offer of PhP6.8198 per kWh, which was below the PhP7.2989 per kWh Total Delivered Headline reserve price, as the best bid. The Total Delivered Headline rate includes Value-Added Tax (VAT) and other charges.

Global Business Power Corporation, through its subsidiaries Panay Energy Development Corporation, Toledo Power Co., and Panay Power Co., submitted a PhP9.7777 per kWh offer, exceeding the reserve price set for the bidding.

Therma Luzon, Inc. initially expressed interest but withdrew its participation in this CSP round.

The TPBAC said the committee’s findings were based on a Pass/Fail assessment of the qualification documents for completeness. It will now conduct a post-qualification evaluation prior to the issuance of the notice of award.

“The TPBAC complied with its mandate to conduct the bid in an open and transparent manner to achieve the least cost of electricity, in accordance with the Department of Energy’s (DOE) Department Circular No. 2018-02-0003 on CSP, as amended by Department Circular No. 2021-09-0030,” said TPBAC Chairman Atty. Ferdinand A. Domingo.

Atty. Domingo added: “We thank the DOE for witnessing and the bidders for participating in this CSP. The resulting Power Supply Agreement (PSA) will help shield electricity consumers from the higher power spot market prices that is typically experienced in Luzon during the summer months.”

This CSP round, which involves a contract from February 26, 2022 to July 25, 2022, is part of Meralco’s preparations to ensure that there will be sufficient, reliable and cost-competitive supply for the summer months when demand is historically high.

“Upon the issuance of a notice of award, Meralco will enter into a PSA with SPPC, which will then be submitted for approval by the Energy Regulatory Commission (ERC). This PSA will help ensure availability of supply, which is especially critical in the upcoming dry months and the National and Local Elections,” said Meralco Head of Regulatory Management Office Atty. Jose Ronald V. Valles.

Meralco is also awaiting the DOE’s approval of the TOR for another CSP covering 180-MW supply needed this coming summer.#