The various energy subsidiaries of San Miguel Corp. arm SMC Global Power will have to suffer heavy sanctions if they back out from the Power Supply Agreements with power distributor Manila Electric Co.

A well-placed source in the energy sector said the Energy Regulatory Commission should look into that penalty clause in the Meralco PSA to determine the liabilities of SMC Global Power after notifying Meralco and the ERC that it will withdraw on 3 October from the PSA.

Consumer groups fear a spike in the monthly bills once SMC withdraws a total of 1 gigawatt of electricity supply when the PSA is unilaterally rescinded.

"What happens when a winning bidder withdraws?" the source asked.

The next step is contained in the term of reference. If they withdraw unilaterally, then there's a consequence and it is in the TOR," according to the energy sector expert.

"The TOR is drawn by Meralco but has the approval of the Department of Energy," according to the source.

SMC had sought an adjustment in the electricity rates provided in the PSA while warning that it will stop supplying Meralco with electricity if ERC will not grant its petitions.

SMC's plea with ERC is for temporary and equitable relief from soaring coal prices and unilateral Malampaya gas supply restrictions.

Over six months, SMC wanted to recover P5.2 billion from electricity users making it a precondition to "continue sourcing fuel and fulfill its power supply contract with Meralco."

SMC also needed ERC approval to amend its tariff and collect an additional P4 per kilowatt-hour for the Sual coal plant and an additional P0.80 per kWh for the Ilijan natural gas facility.

Consumer groups opposed the SMC Global Power petition saying that it does not have the correct reason to alter the price terms in the PSA.

Subsequently in the ERC proceedings, SMC Global Power indicated that it will end the PSA on 3 October but sources said it wanted to take part in the CSP for a new deal.