ERC clears Meralco, FGen PSA

The Energy Regulatory Commission (ERC) granted interim relief to Manila Electric Co. (Meralco) and a unit of Lopez-led First Gen Corp. to implement their six-year power supply deal.

This allows both parties to execute the power supply agreement (PSA), which covers a 414-megawatt supply from the San Gabriel combined-cycle gas-fired power plant in Batangas, subject to conditions.

The ERC has approved an effective rate of P3.7121 per kilowatt-hour (kwh), which would result in a decrease in Meralco’s generation cost by P0.0619 per kwh.

Meralco and First NatGas originally sought for a P3.7712 per kwh rate, which would only reduce the power distributor’s generation cost by P0.0561 per kwh.

However, ERC said the final generation cost would still be determined by the agency.

First NatGas made an offer to Meralco in December 2017, which was subjected to a competitive selection process (CSP).

Meralco, however, did not receive any counter offers during the two rounds of the price challenge and awarded the supply contract to First NatGas.

First NatGas said the PSA “offers a number of benefits that will enhance the quality of Meralco’s power generation portfolio.”

Among these are competitive dependable baseload capacity, an immediate source of replacement power during outages of other baseload plants, and the option for mid-merit supply matched with Meralco’s ramping requirement since San Gabriel has the ability to rapidly ramp up and down upon notice.

Under the terms of the PSA, power from San Gabriel is available for purchase by Meralco immediately. However, the sale of electricity to Meralco will only commence upon its approval by the ERC.

The PSA will have a term of six years, or until Feb. 23, 2024, using gas from the Malampaya field, unless otherwise extended by the parties.

First NatGas and Meralco have the option to extend the PSA upon mutual agreement “in the event that liquefied natural gas becomes available.”

The contract for the Malampaya gas-to-power project offshore Palawan expires in 2024.

Shell Philippines Exploration B.V. (SPEX)—the operator of Malampaya with a 45 percent interest—said the project could still provide gas supply beyond the 2024 expiry of its contract, or until 2027 to 2029.

But Shell needs to resolve its tax issue with the Commission on Audit, which said the project had a tax deficiency amounting to P53.14 billion.

Meanwhile, the Department of Energy (DOE) is pushing for the development of an LNG integrated terminal to develop the country as a trading and trans-shipment hub in the Asia Pacific region.

It has issued the Philippine Downstream Natural Gas Regulation (PDNGR), which details the rules and regulations governing the downstream natural gas industry to develop a market and gain energy security and sustainability. The agency has so far received interests from 13 companies.