Navotas diesel plant operator rescinds contract with Meralco

by Alena Mae S. Flores – April 10, 2016 at 11:25 pm

from Manila Standard Today

The Energy Regulatory Commission has expressed concern over the ongoing dispute between Millennium Energy Inc., the operator of the 100-megawatt diesel-fired power plant in Navotas City, and distributor Manila Electric Co.

ERC chairman Jose Vicente Salazar said Millennium’s dispute with Meralco involved the distribution wheeling services agreement for the 100-megawatt facility located at Navotas Fish Port Complex.

“The commission met with Millennium because they have a problem with Meralco, specifically their DWSA with Meralco,” Salazar told reporters.

Salazar said Millennium had decided to stop supplying capacity to the wholesale electricity spot market after incurring losses due to the wheeling charges collected by the distribution company.

WESM acts as the trading floor of electricity and is being operated by Philippine Electricity Market Corp.

“Millennium is embedded to Meralco, so it is being charged the wheeling charges…This is one thing that is crucial with the agreement. Millennium will have to pay Meralco despite the fact that it is not earning from the market. It is like the highway that even if you don’t use it, you pay for it and it is based on the capacity that you can actually offer to the market,” Salazar said.

Millennium decided to rescind its contract with Meralco and also notified PEMC that it would cease membership in WESM effective April 1.

“Millennium decided to rescind its contract [with Meralco]. It did not want to pay anymore saying that the contract was unreasonable,” Salazar said.

Sources said Millennium was required to pay Meralco P25 million a month under the DWSA, on top of the transmission charges of the National Transmission Corp.

Salazar said Millennium’s available capacity could add supply in the Luzon grid, especially during the dry months amid tight supply. The less power supply in the spot market could push electricity prices higher.

Salazar said ERC was looking on how to settle the issue, as Millennium asked “why would we do business if we’re losing money, and the distribution wheeling charges are too much for us to handle.”

Salazar said Meralco could counter Millennium’s claim, as the power generator signed the contract and knew the charges fully well.

“That is something which you can ask to the market. What is going to be your next move considering there is a need for us to increase capacity since it’s summer,” Salazar said.

PEMC officials are set to issue their comment on the issue Monday while the Energy Department has yet to respond to the issue.

Millennium decided to rehabilitate and operate the diesel plant after former Energy  Secretary Carlos Jericho Petilla announced a possible supply shortage in the dry months of 2015.

Millennium initially hesitated in pursuing the rehabilitation of the diesel plant after encountering problems with the Philippine Fisheries Development Authority, operator of the Navotas Fishing Port complex where the plant is located.

The company, however, relented when Petilla stepped in to ensure that the rehabilitation would push through. Millennium also owns the 620-megawatt Limay power plant previously owned by San Miguel Corp.