23 Dec 2011
The Power Sector Assets and Liabilities Management (PSALM) Corporation will extend its transition supply contract (TSC) with the Manila Electric Company (Meralco) for a maximum period of one year or until three months after the introduction of open access and retail competition, whichever comes earlier, subject to the approval of the Energy Regulatory Commission (ERC).
PSALM President and Chief Executive Officer Emmanuel R. Ledesma Jr. said the decision to extend the TSC with Meralco was made to ensure stability of electricity prices charged to consumers. The decision was reached with the approval of the PSALM Board of Directors which consists of the heads of the Department of Energy, the Department of Finance, and the Department of Trade and Industry.
Ledesma clarified that PSALM decided to reconsider its decision due to various factors, which include the deferment of the implementation of open access and retail competition to October next year. Moreover, Meralco has yet to secure the approval of the ERC on its bilateral power supply contracts with private generating companies that are intended to replace the five-year TSC with PSALM set to expire on 25 December 2011.
Ledesma added that without the approved bilateral contracts and the TSC, Meralco will be exposed to volatile market risks as Meralco has no recourse but to acquire its power supply from the Wholesale Electricity Spot Market where prices tend to be higher at times. Meralco will then have to pass on the higher costs to its estimated five million customers ? a situation that the government wants to avoid.
The extension, on the other hand, involving the supply of the volume for the economic zones has been approved only for a period of 30 days pending finalization of details on supply with relevant parties.
"The extension of the TSC is mainly for the benefit of the companies operating in the economic zones enjoying discounted power rates," Ledesma said. This decision addresses the request of the Philippine Economic Zone Authority and the Semiconductor and Electronics Industries in the Philippines, Inc., to retain the power rate discount inside the economic zones so as not to hamper the investment climate in the country and displace millions of workers employed in these companies.
Ledesma further explained that the extension of the TSC for the benefit of the ecozone locators is also part of an investment stimulus package that the national government is finalizing.
Meralco has sourced around 40% of its power supply from the National Power Corporation since 2006. The TSC was subsequently assigned to PSALM pursuant to Republic Act No. 9136, the Electric Power Industry Reform Act.
Strategic Communications and Partnership Division |