THE Energy Regulatory Commission (ERC) has approved the power supply agreement (PSA) jointly applied for by the country’s largest power distribution utility Manila Electric Co. (Meralco) and Solar Philippines Tanauan Corp. (SPTC).
In its decision promulgated on Feb. 28, the commission said it had approved the applicable rate applied for by the two entities at P5.39 per kilowatt-hour (kWh) and subject to a 2% annual escalation as provided in the agreement.
“The applicable rate is inclusive of the costs associated with the dedicated point-to-point facilities for the two power plants of SPTC; however, this is still without prejudice to the evaluation to be made on the point-to-point application by the Commission,” the ERC said.
Separately, Meralco told the stock exchange on Wednesday that the PSA, which the two entities executed on Dec. 22, 2016, is in support of renewable energy, and that the rate approved by the ERC is “significantly lower” than the prevailing solar feed-in tariff rates.
Under the PSA, Solar Philippines is to supply Meralco electric energy generated by the former’s solar power plant at 25 megawatts (MW) from a site in Tanauan town in Batangas. Another 25 MW are to come from a second site in Naic, Cavite or other locations as determined by Solar Philippines. The supply contract is for 20 years.
The PSA approval comes more than three years after Meralco put out an advertisement on Sept. 23, 2016 calling on power generation companies to challenge the offer of Solar Philippines for the utility’s power supply requirements.
Distribution utilities are required by the ERC to subject power supply offers to a competitive selection process (CSP) to ensure that they agree to the least costly deals from generation companies. Generation charges are pass-through costs that are billed monthly to consumers.
Solar Philippines’ offered price is P3.3-per-kWh lower than the second round of guaranteed FiT of P8.69 per kWh that solar farm developers receive under the feed-in tariff system, an incentive scheme aimed at encouraging the growth of renewable energy. The scheme ended with the 500-MWsolar installation target fully subscribed.
Meralco previously said that adding solar capacity to its portfolio would serve to lower the entire power generation cost. If a deal is closed, it would be the utility’s first supply contract for solar energy.