SMC power unit says losses hit P15B, seeks rate hike

SMC Global Power Holdings Corp. said on Monday that its two power plants had suffered combined losses of P15 billion, prompting the company to seek temporary relief from the energy regulator to allow it to continue supplying power.

It blamed the losses on “skyrocketing global coal prices and unilateral natural gas supply restrictions from Malampaya.”

In a media release, San Miguel Corp. (SMC) President and Chief Executive Officer Ramon S. Ang said: “We are not asking to recover all our losses, neither are we asking for a permanent increase.”

He said the conglomerate’s power unit wants to continue supplying baseload power to Manila Electric Co. (Meralco).

“What we are asking for is just a temporary and equitable relief, to allow the power facilities to survive this difficult period and continue supplying power to Meralco,” he added.

SMC Global Power said its coal power plant in Sual, Pangasinan, and natural gas-fired power plant in Ilijan, Batangas incurred the said losses from 2021 to date.

It said that to cover the losses incurred from January to May 2022, the company had sought a rate increase on its contract capacity under the power supply agreements (PSAs) to be paid for a period of six months.

The company said it is asking the Energy Regulatory Commission (ERC) for a rate increase of P0.80 per kilowatt-hour (kWh) to P5.10 per kilowatt-hour (kWh) from P4.30 per kWh for its 670-megawatt (MW) of contracted baseload capacity from the Ilijan plant.

For the Sual plant, the company an average increase of P4.00 — to P8.30 per kWh from P4.30 per kWh — for its 330-MW contracted baseload capacity.

Mr. Ang attributed last year’s losses to coal prices that reached an average of $176 per metric ton (MT).

“Apparently, coal prices were just at $60-65/MT when we entered into these PSAs. In fact, the widely held outlook at that time is that coal prices will even continue to go down because of a global shift in the energy mix,” he said.

However, coal prices continued to climb in 2021, Mr. Ang said, adding that these “have recently reached unprecedented levels, as high as $440/MT, as triggered primarily by the Russia-Ukraine conflict.”

SMC Global Power said that while the temporary and partial cost recovery relief it sought will result in a temporary increase in prices, it would also allow the power generation facilities to continue sourcing the necessary fuel for continuous operation and power supply.

It added that the net rate impact however to Meralco, assuming that this cost recovery claim is granted by the ERC, is just P0.28 per kWh over a period of six months.

Mr. Ang said that when Meralco bid out its supply requirement in 2019, the Sual and Ilijan plants proposed and adopted an escalation mechanism where the tariff price would start “very low.”

He added that the move was meant to enable consumers to immediately benefit from the competitive selection, and just escalate at a fixed annual rate of 3.5% on the fuel price component.

Mr. Ang said the company, in consideration of the difficulties the country is facing from the pandemic, had absorbed losses of P10 billion.

“Overall, the company is looking to recover from P5.2 billion in losses for the period January to May 2022,” SMC Global Power said. — A.E.O. Jose