Ball in ERC’s court

Consumers suspect that SMC will again resort to seeking the regulator’s intervention when it has secured the deals with Meralco.

Since Asian powerhouse San Miguel Corp. grew its empire out of its globally popular beer and its numerous food brands, it should give back to consumers in the new ventures that it enters into, instead of cashing in from them.

Consumer groups, during the ongoing hearing on SMC Global Power’s rate hike petitions, questioned its reliability after its petitions seek to recover P5.2 billion over six months through higher electricity rates.

It also wanted 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.

It claims to be running P15 billion in losses from higher coal prices and the supply restriction from the Malampaya natural gas field.

Discussions in the ERC lately turned to SMC Global Power notifying Meralco that it will unilaterally drop its Power Supply Agreement amid its claimed mounting losses.

Oppositors demanded that SMC Global Power show proof that it is indeed piling up losses before it cuts the PSA.

They suspect that SMC Global Power, since provisions of its current contract do not allow tariff revisions, will join a new auction to present an offer with new terms favorable to it.

It submitted a low offer to secure the Meralco PSAs. Consumer groups said the terms and conditions were very clear in the deals. The SMC unit knew the risks, and these should have been reflected in its offer.

SMC Global Power’s rivals in the competitive selection process submitted prices that were more grounded on reality, inevitably losing in the bid.

Now, SMC Global Power is using its corporate might to force ERC into granting its adjustment petitions.

Particularly distressing is the practice of SMC’s energy business to submit a very low offer and then, later on, seek adjustments from the regulator, which defeats the purpose of the competitive selection process.

Last year, there were two other energy affiliates of SMC, Excellent Energy Resources Inc. and Masinloc Power Partners Ltd. Co., that cornered Meralco contracts to deliver 1,200 megawatts of capacity for P4.1462 per kWh and 600 MW for P4.2605 per kWh covering 20 years starting 2024.

Very noticeable is that both offers were lower than the P4.30 per kWh being charged by Sual and Ilijan under the PSA, which SMC claims before ERC is too low to recover fuel costs.

Consumers suspect that SMC will again resort to seeking the regulator’s intervention when it has secured the deals with Meralco.

It will be up to the ERC to discern the long-term implications of giving in to the threats of SMC on private sector confidence regarding the integrity of contracts in the country.

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