Unforced errors

SMC Global Power issued a notice of terminating the PSA on 3 October which serves as the deadline for ERC to issue its decision on the rate increase petition.


September 9, 2022

In sports such as basketball, games are won and lost as a result of unforced errors that are a bungler’s own doing. The one who screws up does not run to the referee for a reset to erase the fumble.

Recently, San Miguel Corp. has been muscling its way through with the use of government minions to reverse what are apparent faulty business decisions.

Its unit SMC Global Power has pending petitions with the Energy Regulatory Commission for “temporary and equitable” relief through adjustments in its contracted rate in its power supply agreement with Meralco.

SMC Global Power wanted to recover P5.2 billion by passing on its added expenses to electricity users or it will discontinue the PSA with Meralco.

Thus, SMC is seeking an additional P4 per kilowatt-hour for the Sual coal plant and an additional P0.80 per kWh for the Ilijan natural gas facility.

SMC Global Power claims to lose P15 billion from surging costs of coal and the natural gas supply restrictions from the Malampaya field although consumer groups are asking the conglomerate to show proof of it.

SMC Global Power issued a notice of terminating the PSA on 3 October which serves as the deadline for ERC to issue its decision on the rate increase petition.

Consumer groups said SMC should be penalized to the extent of Meralco blacklisting the company from future PSA bids if it unilaterally cancels its contract.

Similarly, SMC is using the state energy firm Philippine National Oil Co. to compel the Malampaya consortium to obtain priority in the supply of banked gas that it acquired without bidding from PNOC through a $1.2 billion deal.

PNOC is the one running after the Malampaya operators to put in front of the queue.

First Gen Corporation of the Lopez group had obtained an equivalent of half the volume of banked gas that SMC Global Power contracted way ahead of that of the SMC unit.

The banked gas for the First Gen power plants is all that the Malampaya consortium can supply for the year which in effect will result in the 1,200 Ilijan plants without a reliable source of fuel since it ended the supply contract with Malampaya and SMC’s liquefied natural gas facility is not yet ready.

An Offtake Framework Agreement signed between PNOC and the Malampaya consortium in December 2014, provided that the lifting of banked gas is only limited to 35 terajoules annually, which is the entire volume committed to First Gen.

During a Senate committee on energy hearing, it was PNOC officials demanded that “if the natural gas will not be delivered, it is our position that the money that was taken by the consortium be returned to the Philippine government because we consider this as public funds.”

The truth, however, is that PNOC is acting as a bill collector for SMC Global Power Unit South Premier Power Corporation that runs the Ilijan plant which sealed a gas sale and purchases agreement with PNOC last June for the banked gas, the same month that SPPC acquired ownership of the Ilian plant under a 2010 independent power administration agreement.

Playing fair is accepting the risks from business decisions and living with their consequences without making others, whether it’s consumers or other business groups, suffer.

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