The Energy Regulatory Commission (ERC) has granted Manila Electric Co. (Meralco) approval to continue drawing power from the 1,200-megawatt (MW) Sta. Rita gas-fired power plant in Batangas for an additional six months, a move expected to save consumers an estimated P4.2 billion through the use of Malampaya gas and other rate-reduction measures.

Meralco is the country's largest electricity distribution utility, serving over seven million customers across Metro Manila and surrounding provinces, meaning rate adjustments under its power supply agreements have an outsized impact on household and industrial electricity bills nationwide.

Jose Ronald V. Valles, Meralco's senior vice-president and head of regulatory management, confirmed that the ERC had issued a third interim extension of the utility's power purchase agreement with First Gas Power Corp. (FGPC), the operator of the Sta. Rita plant. The series of interim extensions reflects ongoing challenges in finalizing longer-term power supply arrangements as the Philippines navigates the scheduled depletion of the Malampaya gas field and efforts to secure replacement fuel sources.

"There is a directive on the part of the Department of Energy (DoE) for us to extend the Sta. Rita and to negotiate for the best terms. And that is what we have done," Mr. Valles stated during a briefing on Wednesday.

"The rate that we are charging today as a result of that negotiation and extension is what the ERC has approved," he added.

The Sta. Rita plant is 60%-owned by Razon-led Prime Infrastructure Capital, Inc. The DoE has characterized it as "among the most critically needed generation assets in the Luzon grid."

In a 10-page order promulgated on June 24, the ERC authorized Meralco and FGPC to implement their agreement through December 25, 2026, under "mutually agreed terms as are not less favorable to the public interest," as required by the DoE.

Under the negotiated rate-reduction measures, FGPC will assume the full financial risk of any peso depreciation beyond P62 against the US dollar, absorb line-rental costs exceeding P0.15 per kilowatt-hour (kWh) up to P25 million per billing period, and provide a monthly P50-million discount on nonfuel charges.

As a condition of the extension, FGPC is also required to share its Malampaya gas allocation with the Ilijan power plant beginning September 1, 2026. This arrangement is intended to reduce fuel costs under Meralco's existing power supply agreement with South Premiere Power Corp., a subsidiary of San Miguel Global Power Holdings Corp.

The supply of Malampaya gas to the Ilijan plant is projected to generate P3.8 billion in fuel savings. Combined with the other rate-reduction measures, total estimated savings are expected to reach P4.2 billion from September through December 2026, translating to an average reduction of P0.36 per kWh for Meralco customers.

Prime Infra stated that the use of Malampaya gas at one of the country's largest power-generation facilities would support reliable electricity generation, provide fuel-supply flexibility during the contract period, and contribute to a more resilient and diversified energy mix.

Prime Energy Resources Development B.V., a subsidiary of Prime Infra, operates the Malampaya deepwater gas-to-power project, which supplies approximately one-fourth of Luzon's electricity requirements.

"This demonstrates that indigenous Malampaya gas can help lower electricity costs for consumers while delivering reliable energy supply," said Prime Energy President and Chief Executive Officer Donnabel Kuizon Cruz.

— Sheldeen Joy Talavera