ERC allows SPTC’s PSA with Meralco

By BusinessMirror – March 15, 2019

THE Energy Regulatory Commission (ERC) has issued an order allowing Solar Philippines Tarlac Corp. (SPTC) to implement a provision in its power supply agreement (PSA) with the Manila Electric Co. (Meralco) that calls for a 2-percent annual escalation in the rates.

“The commission hereby partially grants the motion for partial reconsideration with respect to its first prayer and allows the 2 percent annual escalation under the PSA,” said the ERC order dated January 23 and uploaded on its web site on Thursday.

In June last year, the ERC issued an order that provisionally authorized SPTC and Meralco to implement their PSA under which SPTC will sell power to Meralco P2.99 per kilowatt-hour (kWh).

However, the rate is not subject to adjustment or escalation, the ERC ruled.

Meralco then filed a manifestation informing the ERC of SPTC’s refusal to accept the ERC’s order because of the disallowance of the annual escalation rate of 2 percent provided in Section 5.3 of the PSA.

SPTC filed a motion for partial reconsideration with the ERC in July last year. It said SPTC has established the basis of the 2-percent annual escalation in its PSA. Also, the rate is still significantly lower than the prevailing Feed-in-Tariff (FIT) rate and the approved rates for other solar-power plants.

It argued that if the ERC will disallow the 2-percent annual escalation, SPTC should instead be allowed to charge the levelized average rate of P3.7144 per kWh in the meantime.

The commission took note that SPTC has structured its business model in a way that it would be able to offer low power rates by spreading out the recovery of its investments over the 20-year term of the PSA.

The ERC also took note of SPTC’s claim that without the 2-percent annual escalation, it would incur losses for the entire 20 years, thus denying it the opportunity to recover its investment.

“In evaluating the reasonableness of the proposed rate of P2.99 per kWh, the commission resolved to allow SPTC to apply the 2-percent annual escalation clause, as prayed for in its motion for partial reconsideration,” the ERC said.