Given no choice under its current fixed—rate power supply agreement with Meralco, San Miguel Corp. said it would sell its electricity to the open market and would enter into contracts with off-takers after it failed to get rate hikes it requested from government.
Since it had been denied relief for losses piled up since the 2019 Power Supply Agreement it had with Meralco, San Miguel Corp. will sell its power supply to the wholesale electricity spot market (WESM) where it stand a better chance of getting actual market prices for its excess power.
But SMC also has a commitment, which it did not terminate, to supply Meralco continued power under its PSA.
SMC last Thursday disclosed its plans of selling its power plants’ output to WESM and will enter bilateral contracts with off-takers after it failed to get the power rate hikes it requested from the Energy Regulatory Commission to cover for losses that it said reached P15 billion since 2019.
In a stock market disclosure, SMC assured that it will continue supplying power to Manila Electric Co. (Meralco) within the 60-day period after the receipt of the ERC decision.
According to ERC, SMC is legally bound to continue supplying power to Meralco as stated in their power supply agreements (PSAs), which set 60 days before it can terminate the supply deal.
However, SMC said that once the termination of the PSAs takes effect, its units South Premiere Power Corp. and San Miguel Energy Corp. — the administrators of the Ilijan and Sual power plants — will have to sell their generated power to WESM “and enter into bilateral contracts with other off-takers.”
On Wednesday, SMC said it would explore all legal remedies following the decision of the ERC.
The ERC denied Monday a joint petition from Meralco and SMC’s units, saying the rate increase sought by them was based on a valid “change in circumstance.”
The ERC denied the petition, saying both SMC and Meralco had not exhausted available options before filing the petition.
“[SMC Global Power Corp.] and its subsidiaries will remain compliant with its financial covenants under all existing loan agreements and other debt instruments,” SMC said.
Tags: #SMC, #ERC, #WESM, #electricity