First Gen Corp. (FGen) and the Manila Electric Co. (Meralco) are currently in talks for another extension of their gas deal that will eventually pave the way for the continued supply of electricity being sourced from FGen’s gas plant in Batangas.
‘You know that the Sta. Rita was extended up to January, but we’re hoping that will also be extended beyond. But that’s work in progress,’ said First Gen President Francis Giles Puno.
The Energy Regulatory Commission (ERC) had granted a five-month extension, or until January 2026, of their power purchase agreement (PPA), effectively averting the shutdown of the 1,100-megawatt (MW) Sta. Rita gas power plant.
Puno, however, could not yet say how long First Gen and Meralco want the gas deal to remain in effect. ‘That’s currently in negotiation.’
Meralco utility economics head Lawrence Fernandez had said that during this period both parties will continue negotiations on the PPA extension and will have to go back to the ERC after the negotiation.
Without the extension, First Gen would likely be constrained to shut down the Sta. Rita plant, the biggest among the four-gas fired power plants it operates in its Clean Energy Complex in Batangas. However, the extension may result in higher generation rates, the ERC noted in its previous decision.
‘Although the motion evidently impacts Meralco’s generation charge.there exist other equally compelling and urgent reasons that justify the proposed extension,’ the ERC said.
‘The issue transcends mere rate concerns and becomes a matter of energy security. Such a scenario could lead to widespread blackouts, with repercussions extending beyond potential increases in Meralco’s generation charge. Ultimately, the resultant blackouts could severely impact the national economy. In the end, this is what the commission is asked to reconsider and rule upon.’
These reasons, added the ERC, are anchored in policy considerations, such as ensuring grid and supply security and reliability, which fall more appropriately within the purview of the Department of Energy (DOE).
The DOE, for its part, told the ERC that the interim extension will not violate any DOE policy, particularly the competitive selection process (CSP) requirement because the Sta. Rita PPA was approved pre-Electric Power Industry Reform Act (Epira). Hence, the PPA is beyond any CSP policies issued by the DOE under Epira.
First Gen’s PPA with Meralco involving the 420-MW San Gabriel gas plant already expired last year while a similar agreement involving the 500MW San Lorenzo gas plant will expire in 2027.
Last August, First Gen said it recorded a slight increase in its net income at $151 million (P8.6 billion) in January to June from $150 million (P8.4 billion) a year ago due to lower revenues. Revenues stood at $1.213 billion (P69.3 billion), down 5 percent from $1.278 billion (P72.1 billion) because of lower electricity volumes, particularly in the gas platform, sold during the period.
The natural gas portfolio accounted for 66 percent of the company’s total consolidated revenues, while 30 percent came from the geothermal, wind and solar plants of Energy Development Corp. (EDC). The balance of 4 percent comes from the company’s hydroelectric power plants.
Meanwhile, Meralco reported last July that it will close the year with about P50 billion in consolidated core net income (CCNI), higher than last year’s P45.1 billion, after posting a CCNI of P25.5 billion in the first half.
In the first half, Meralco’s CCNI stood at P25.5 billion from P23.2 billion in the same period last year, with the distribution business accounting for the largest share of 54 percent or P13.7 billion. It also realized significant contribution from the growing power generation business with its share now at 37 percent to P9.4 billion of the CCNI.
The retail electricity supply and non-electricity businesses, meanwhile, brought in a combined P2.4 billion or 9 percent.