‘Why allow ‘hostaging’ of Pinoys on power service contracts?’

September 9, 2022

The Energy Regulatory Commission was taken to task yesterday for allegedly not fulfilling its mandate to protect consumers, particularly in not allowing the unilateral withdrawal of power contracts.

While SAGIP Partylist Representative Rodante Marcoleta did not name the company he referred to in hitting out strong against the ERC, San Miguel Corp. unit SMC Global Power has recently notified both Meralco and the ERC that it will end its PSA with the electricity distributor by 3 October.

The ERC is holding a public hearing next week on the intent of SMC to abandon the supply deal, a source in the regulatory body said.

“There are companies already applying for readjustment of their electric rates knowing that the contract is fixed,” Marcoleta said. He explained that ERC should not even accept petitions to amend PSAs with fixed provisions.

Marinduque Representative Allan Lord Velasco has said his panel will support the Department of Energy and the ERC in attaining their mandates under the Electric Power Industry Reform Act.

Marcoleta, vice chairperson of the House panel, asked ERC about its seeming inability to enforce its mandate of protecting electricity users.

Moreover, he asked big business: “Why do you think the Filipino people would be hostaged on assumptions that were present at the time of the agreement?”

SMC Global Power has filed a petition for an adjustment in the rates in the PSA units of San Miguel Energy Corporation, which run the Sual coal plant and the Ilijan natural gas plant of South Premiere Power Corporation.

“While we are talking about the reliability of supply, amid the problems coming in, initializing or maintaining programs to deliver power in the future provides no certainty,” according to Marcoleta.

Marcoleta quoted a Supreme Court ruling that any expense charged to the consumer that in any way is not related to the service and benefit that they derive is inequitable and unjustified.

“How can you even accept applications for readjustment of rates when you know that the contract is fixed? That is the problem,” Marcoleta lamented. He cited as example a 10-year contract “for one company.”

“I will imagine if I’m the investor, some of these companies use coal. If a contract was signed in 2019, coal for instance costs P60 per metric ton, wouldn’t the company consider that prices will rise over time?” Marcoleta asked.

Consumer groups made the same argument during the ERC public hearings as they said that the change in circumstances that SMC Global Corp. had invoked to cancel the deals were not unknown.

“Companies usually hedge on prices in large supply contracts” to ensure the reliability of supply,” according to Marcoleta.

ERC, Marcoleta said, provides parameters that the regulator itself does not follow.

“The ERC was created to protect the interest of the consumers which usually does not happen,” he pointed out, explaining that “the objective of the ERC is to provide quality, reliable and secure electricity supply.”

Marcoleta also referred to the Department of Energy’s responsibility to ensure the reliability of supply as the Malampaya natural gas field reserves run out.

“There are five power plants that rely on natural gas which supplies 30 percent of the needs of Luzon, so if we will not have the liquefied natural gas terminals, who will supply the fuel for the gas plants? That would be a huge problem,” according to Marcoleta.

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