Consumers doubt SMC reliability

Organizations under the Power for People Coalition wanted the ERC to resolve first consumers’ petition for SMC Global Power to show proof of its claim of a P15-billion loss

September 7, 2022

Consumer groups are demanding that the Energy Regulatory Commission cites SMC as being unreliable in contracts they enter into after its unit San Miguel Global Power issued a notice to terminate its Power Supply Agreement with utility firm Manila Electric Co. on 3 October.

The SMC unit wanted to end its engagement with Meralco citing its mounting losses which it estimated at P15 billion from rising fuel costs primarily coal and the unilateral supply restrictions from the Malampaya natural gas field.

Organizations under the Power for People Coalition wanted the ERC to resolve first consumers’ petition for SMC Global Power to show proof of its claim of a P15-billion loss before acting on the notice of ending the PSA.

Moreover, P4P said Meralco must take the side of the consumer in compelling SMC to honor its contract.

Ending the PSA was SMC Global Power’s threat if ERC fails to immediately act on its petition to increase rates using the escalation clause in its PSA.

Consumer groups, however, said that the reasons SMC used in revising the terms are not provided in the PSA.

“Meralco should act in defense of consumers, who are being blackmailed,” according to P4P Convenor Gerry Arances.

Once San Miguel Global Power gets out of the contract, Meralco should have the company blacklisted from future contracts.

“Where can you find a business interest which gives priority to the supplier that is bound by a clear provision in its contract that it cannot alter the terms,” according to Arances.

Huge power void

Arances said ERC should study the implications of the withdrawal since it would mean that 1 gigawatt of electricity supply will be taken off the Luzon grid.

“That company should be subjected to an evaluation of its reliability to enter into contracts,” he said.

“ERC, first and foremost, should decide on the opposition of the petitioners which are the electricity consumers,” Arances added.

Allowing SMC Global Power to cut its supply to Meralco would result in a disaster in terms of higher monthly bills to households.

“That will be a disaster in terms of electricity prices now, due to shocks of the global market, which puts costs in the spot market prohibitive. But (it will be lower) if the new Green Energy Auction Reserve price will fill the possible void – it will be around 3.67 per kilowatt-hour straight pricing,” Arances said.

Before the Senate committee on energy hearing yesterday, P4P blasted SMC Global Power’s effort to amend the provisions of its PSA with Meralco despite the bidding process being long done.

“SMC’s move to trap the Filipino consumers to shoulder its operating costs in the face of the inflation is the height of unfairness. SMC can and should shoulder business risks that it is more capable of mitigating compared to ordinary consumers,” according to P4P.

“This persistent attempt of SMC to earn from the misery of Filipinos should not even be entertained,” Arances said.

“Electricity users are not spared from rising power rates. Starting April 2021, residential power rates have started to rise steadily until June 2022, despite announcements of electricity rate rollback at the start of the year,” Arances said.

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