Meralco eyes new supply deals

MANILA, Philippines - Power distribution giant Manila Electric Co. (Meralco) said it expects to retain or even lower the generation costs of electricity through new power supply agreements (PSAs).

The PSAs that will be implemented next year will be competitively priced compared with the expiring transition supply contracts (TSCs), a company top executive said.

“We are hopeful that generation charge from these new PSAs, on average, will be as competitive if not more competitive than existing sources,” Meralco president and CEO Oscar Reyes told reporters.

“These new PSAs will help contain, if not reduce, the generation cost component of our power supply,” Reyes said.

The generation charge accounts for 56 percent of the customers’ average monthly power bill. This charge goes directly to suppliers of Meralco.

Meralco charges only account for about 16 percent of the total electricity bill. The rest of the pass-through costs include taxes, subsidies and other charges.

Reyes said the generation charge might drop by as much as 50 centavos per kilowatt-hour (kwh) in the long term through the new PSAs, depending on certain scenarios on prices of coal that fuels several power plants.

Actual generation charge for November, which will reflect in electricity bills this month, fell by 15 centavos per kwh to P5.47 per kwh.

Meralco has contracted up to 2,880 megawatts (MW) of power supply in the next seven years to replace TSCs that will expire late in 2012 and 2013, Reyes said.

A TSC is a temporary power supply deal between power distributors and state-owned power plants that were subject to privatization.

To secure the electricity needs of its customers, Meralco signed the new supply deals with generators. It will also ensure that Meralco will rely less on expensive electricity in the Wholesale Electricity Spot Market.

The new supply deals, together with Meralco’s other bilateral contracts, account for about 95 percent of the requirements of Meralco customers in 2013.

Specifically, PSAs were already signed with Consunji-led SEM-Calaca Power Corp., Masinloc Power Partners Co. Ltd., Aboitiz-led Therma Luzon Inc., South Premiere Power Corp. and San Miguel Energy Corp.

Meralco projects its electricity sales to grow four to five percent next year, within the average in the past five years, as demand from industrial, residential and commercial segments continue to rise.

Meralco’s consolidated customer accounts rose 3.5 percent to a record 5.16 million as of end-September as the company added 130,042 new customers from the start of the year.

Meralco is indirectly controlled by Hong Kong-based First Pacific Co. Ltd. and partly owned by San Miguel Corp.