SMC Global Power Holdings Cuts Power Supply Agreements

San Miguel’s power arm, SMC Global Power Holdings Corp. (SMCGP) notified Manila Electric Co. (MERALCO) of its intent to terminate their power supply agreements (PSA). SMCGP disclosed that “unexpected and unprecedented change in circumstances” were the primary reasons for its termination along with the continuous increase in fuel prices brought about by the ongoing Russia-Ukraine conflict. The power supply agreements’ termination would be effective starting October 4.

This is assuming that no relief is given as there is a joint petition of the SMCGP units – South Premiere Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC) with Meralco for a temporary and partial cost recovery relief on their agreements. This recovery relief comes from the losses that the company incurred from January to May. Such relief comes in the form of a rate increase on its contract capacity under the PSAs to be amortized for a period of 6 months.

SMCGP stated that prices of electricity would increase as much as 30% in Metro Manila and in nearby provinces if regulators will not act on their petitions. Hypothetically, if the relief is granted, electricity prices in Luzon alone would go up by only ₱0.30 per kilowatt hour over a period of 6 months. Without such relief, an estimated increase of at least ₱0.80 up to ₱1.30 per kilowatt hour would be felt over the next 3 to 4 months as Meralco would have to find alternative power sources during the time.

SMCGP’s President Ramon Ang issued statements, asking for a fair and objective assessment of its petition. “With much regret, we have to admit to the public that the current situation is seriously jeopardizing our other critical operations, projects, and financial obligations. We are only seeking a partial adjustment in price so we can continue supplying to Meralco and minimize the impact of termination on industries and consumers, particularly those from the lower-income households who will get hit harder.”

The company is expecting price increases over the term of the contract until 2030 if the requested relief is not acted upon.  Ang added that the current PSAs help keeps electricity prices low for their agreements are one of those fixed-rate power supply agreements which do not transmit additional costs to consumers. Given that their power plants account for 25% of Luzon’s power grid,  Ang has requested the government to prevent the crippling of the said plants.  The SMC executive still remains hopeful and cooperative, however, as it continues to open its doors for further discussion on continuously supplying energy to the country.

Source: BusinessMirror