Consumers rap SMC for econ sabotage

September 5, 2022

San Miguel Corp. unit SMC Global Power has been accused of blackmail and economic sabotage for threatening to terminate its contract with Manila Electric Co. if its twin petitions for rate increases are not granted.

Gerry Arances, convenor of consumer group P4P, accused SMC Global Power of holding consumers hostage to attain its objectives.

SMC Global Power filed a motion of termination, asking Meralco to terminate the contract, which Arances claimed should not be allowed even with the termination clause in the deal.

“Legally we are studying the provisions of the clause but the initial analysis stated that the clause stating the termination can be allowed ‘when there’s a change in circumstances,’” Arances said.

Change in circumstances can’t be invoked in the termination of the Power Supply Agreement since the company should have factored in the reduced output of the Malampaya gas field which has been forewarned, according to Arances.

“In its opposition, P4P said that SMC, when it acquired the Ilijan power plant, should have considered the depletion of natural gas supply in the offer that it gave Meralco in the PSA,” according to Arances.

“The Department of Energy had long warned and had presented studies on the eventual exhaustion of the Malampaya field. Studies also indicated that Malampaya will likely shut down in 2027,” Arances added.

“They know that Malampaya is winding down, thus their decision to shift to imported liquefied natural gas,” he averred.

Arances said that even in 2019, it is common knowledge that the Malampaya gas fields would soon dry up.

Arances said in choosing fossil fuels, SMC is betting that the volatility of the world market would favor them.

“At stake here is the reliability of contracts. In the final analysis, rescinding the PSA is a form of economic sabotage,” Arances added.

P15-B loss claimed

The basis of the petition for rate increases was SMC Global Power’s claim of P15 billion in losses from the operations of its 1,200 megawatt Sual plant and the 1,200 MW Ilijan power plant amid the restrictions on supply from Malampaya and the high cost of gas and coal in the world market.

Arances said SMC Global has not shown any proof on its claimed financial downturn and if, at all, the conglomerate must just be referring to a reduction in its huge annual profit.

“Even after posting P17.9 billion net income last year, SMC has the gall to threaten consumers and lock them in a hostage situation,” Arances indicated.

Straight pricing preferable

The P4P head said if the Power Supply Agreement is terminated, “Meralco should ensure that it will not rely on coal and gas to make up for the lost supply and instead pick straight energy pricing which provides more stable pricing amidst global shocks,” he said.


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