Forced to buy from the wholesale market where prices have swung between P7 and P9 per kWh
In the intricate web of energy markets and regulatory authority, millions of Filipino households now find themselves caught between a court ruling and the volatile rhythms of wholesale electricity pricing. Meralco, the utility that powers Metro Manila and its surrounding provinces, has lost a 670-megawatt supply contract priced at P4.30 per kilowatt-hour after a legal dispute between its supplier and the Energy Regulatory Commission unraveled the agreement. What was once the cheapest power on Meralco's books must now be replaced on a spot market where prices can run more than twice as high — a gap that 7.5 million customers may soon feel in their monthly bills. The episode is a reminder of how deeply the architecture of regulation, law, and commerce shapes the most ordinary moments of daily life.
- Meralco's loss of a 670-MW contract — its most affordable power source — has left a significant hole in its supply portfolio, with spot market replacements costing 60 to 110 percent more per kilowatt-hour.
- A Court of Appeals restraining order froze the ERC's authority over the supplier's rate petition, effectively handing SPPC the leverage to walk away from the deal entirely.
- With grid yellow alerts already pushing spot prices to P7–P9 per kWh, the timing of the contract loss could not be more precarious for consumers heading into the billing cycle.
- Meralco is in urgent negotiations with alternative power generators, but executives cannot say how long securing replacement contracts will take — leaving millions of customers in a state of financial uncertainty.
- Regulators remain unsure whether the contract termination is permanent or temporary, and have referred the matter to the Solicitor General while reminding Meralco of its legal duty to supply power at least cost.
- The outcome hinges on three moving parts: spot market price trajectories, the speed of new supply deals, and whether the courts will ultimately restore the original SPPC agreement.
Meralco's 7.5 million customers are facing the prospect of higher electricity bills after the utility lost a key power supply contract with South Premiere Power Corp., which operates the Ilijan power plant in Batangas. The 670-megawatt agreement, priced at approximately P4.30 per kilowatt-hour, had been the cheapest source of power on Meralco's books — accounting for 13.4 percent of its total supply in November. Its loss means the utility must now turn to the Philippine Wholesale Electricity Spot Market, where prices have recently surged to P7–P9 per kWh during periods of grid stress.
The contract's unraveling traces back to a legal dispute between SPPC's parent company, SMC Global Power, and the Energy Regulatory Commission. The ERC had denied SPPC's request for a temporary rate increase under their 2019 supply agreement, citing gas constraints at Ilijan and rising coal costs at the Sual plant in Pangasinan. The Court of Appeals sided with SPPC, issuing a restraining order that blocked the ERC's ruling — and in the wake of that decision, SMC Global moved to terminate the supply deal with Meralco.
Meralco has described its response as urgent but measured. Spokesperson Joe Zaldarriaga said the company is exhausting every option to cushion the blow for customers, while utility economics head Lawrence Fernandez acknowledged that the timeline for securing alternative contracts remains uncertain. Spot prices could shift in either direction over the coming weeks.
The regulatory situation adds another layer of complexity. ERC chairperson Monalisa Dimalanta noted that it remains unclear whether the contract has been permanently terminated or merely suspended, as the underlying case is still before the Court of Appeals. The ERC has referred the matter to the Office of the Solicitor General and has reminded Meralco of its legal obligation to serve its captive market at the lowest possible cost — a mandate that grows harder to fulfill when its most affordable supplier has stepped away.
Meralco's 7.5 million customers are bracing for higher electricity bills next month. The utility company announced Wednesday that it lost a crucial power supply contract—670 megawatts of electricity priced at roughly P4.30 per kilowatt-hour—and will now be forced to buy from the wholesale market where prices have been swinging between P7 and P9 per kWh. The difference is stark and immediate.
The contract in question came from South Premiere Power Corp., which operates the Ilijan power plant in Batangas. That plant feeds 670 megawatts into the 1,200-megawatt facility. Meralco received notice this week that SMC Global Power Holdings Corp., which owns SPPC, was ending the supply agreement. The termination follows a Court of Appeals decision that sided with SPPC and blocked the Energy Regulatory Commission from enforcing its own ruling. The ERC had denied SPPC's request for a temporary rate increase under their 2019 power supply agreement, citing gas constraints at Ilijan and soaring coal prices at the separate Sual plant in Pangasinan. The appeals court disagreed and issued a temporary restraining order, freezing the ERC's decision.
What this means in practical terms: Meralco supplied 13.4 percent of its total power from that SPPC contract in November. That was the cheapest power on its books. Now the utility has to replace it on the spot market—the Philippine Wholesale Electricity Spot Market, or WESM—where prices are volatile and tied directly to real-time supply and demand. When the grid was under yellow alert in recent days, spot prices hit P7 to P9 per kWh. That's a 60 to 110 percent jump from what Meralco was paying SPPC.
Meralco's response has been measured but urgent. The company said it is negotiating with other power generators to lock in replacement supply before the contract gap widens the bill shock. Spokesperson Joe Zaldarriaga said the utility is "exhausting all efforts to mitigate any impact" on customer bills. Lawrence Fernandez, Meralco's head of utility economics, acknowledged the uncertainty: the company still doesn't know how long it will take to secure alternative contracts, and spot market prices could move in either direction over the next two weeks.
The regulatory picture remains tangled. ERC chairperson Monalisa Dimalanta said it's unclear whether SPPC has permanently terminated the contract or merely suspended it, since the underlying case is still pending before the Court of Appeals. The ERC has referred the matter to the Office of the Solicitor General to determine what legal steps to take next. The regulator also reminded Meralco of its obligation under Philippine energy law to supply power "in the least cost manner" to its captive market—a requirement that becomes harder to meet when your cheapest supplier walks away.
Meralco's executives stopped short of predicting exactly how much customer bills will rise. Too many variables remain in play: the trajectory of spot market prices, how quickly alternative supply contracts can be signed, and whether the appeals court process will ultimately restore the original SPPC deal. What is certain is that the utility's customers—millions of households and businesses across Metro Manila and nearby provinces—will feel the impact in their next bill if spot market prices remain elevated and no replacement supply materializes quickly.
Notable Quotes
We are exhausting all efforts to mitigate any impact of this recent development on our customers in electricity bills.— Joe Zaldarriaga, Meralco spokesperson
It really depends on a lot of factors. We still have around two weeks remaining for supply months, and we also don't know the trend of spot market prices for the coming days.— Lawrence Fernandez, Meralco head of utility economics
The Hearth Conversation Another angle on the story
Why did SMC decide to end this contract now, after years of supply?
They didn't want to end it—they wanted a rate increase. When the ERC said no, they went to court. The appeals court sided with them and froze the ERC's decision. That gave them leverage, and they used it.
So this is a negotiating tactic?
It looks that way. They're signaling that if they don't get the rate increase they want, they'll stop supplying. Meralco is caught in the middle—they need the power, and their customers need affordable power.
What's driving the cost pressure on SMC's side?
Two things. The Ilijan plant uses natural gas, and gas prices have been constrained. The Sual plant burns coal, and coal prices have spiked globally. SMC says they can't absorb those costs at the old contract price.
Is that a reasonable argument?
It depends who you ask. The ERC said no—the contract was locked in, and SMC should have hedged their fuel costs. But the court disagreed. Now we're in legal limbo.
What happens to Meralco's customers in the meantime?
They're exposed to the spot market, which is expensive and unpredictable. Meralco is scrambling to find alternative suppliers, but there's no guarantee they'll find 670 megawatts at a price close to what they were paying before.
How long can this situation last?
That depends on the courts. The appeals case is still pending. In the short term, Meralco has maybe two weeks to find replacement supply before the contract gap hits their next billing cycle.