SMC must foot bill

Only objective of the generation companies taking advantage of the heightened post-Covid business activities is guaranteeing profits at the expense of consumers already suffering from high inflation.

By TEB

September 14, 2022

The P15 billion losses that San Miguel Corp. claimed to have suffered thus far this year in its power supply agreements with distributor Manila Electric Co. are the results of an error in judgment that electricity users should not be blamed for.

This is the basic argument of consumers and renewable energy advocates, led by the Philippine Movement for Climate Justice, Sanlakas, and the sustainability think-tank Center for Energy, Ecology, and Development In calling for the Energy Regulatory Commission to junk any adjustment in the PSAs of SMC Global Power units South Premiere Power Corporation and the San Miguel Energy Corporation.

SPPC, which runs the Ilijan natural gas plant, and SMEC which operates the Sual coal plant, supply a total of one gigawatt to Meralco, which SMC Global Power now threatens to withdraw if its petition for adjustments in the PSA rates are rejected.

Provisions in the PSAs only provide for “change in circumstance” that can amend the fixed price in the deal that according to the consumer groups are not what SMC claims through the depletion of the Malampaya gas fields for SPPC and higher coal prices for SMEC.

In their argument, the consumer groups said experts knew as early as 2015 that the Malampaya gas fields are running out while it is common knowledge that the price of coal fluctuates, as with all other fossil fuels.

The question they are asking now is if SC Global Power ignored “the realities of the fossil fuel market so they can offer a low price at first and then increase it later as it is trying to do now?”

If so, the consumer groups said electricity users should not be made to pay extra for the SMC missteps.

The ERC in assessing the SMC Global Power petitions and along with it its decision to unilaterally pull out from the PSAs should be guided by the Electric Power Industry Reform Act of 2001 that requires all parties involved to provide the lowest cost of electricity possible, to be secured by a transparent process of public bidding.

The oppositors said price adjustments in the PSAs evade the public bidding requirement as the contract is already in force.

The consumers’ plea before the ERC is that should SPPC and SMEC be allowed to increase power rates, “it will send a message that energy companies can evade the spirit of the law and pass on all their costs to consumers.”

The groups are worried over the other energy producers being encouraged to recklessly quote low prices and then adjust prices later.

Thus, the only objective of the generation companies taking advantage of the heightened post-Covid business activities is guaranteeing profits at the expense of consumers already suffering from high inflation.

Members of Congress had told the ERC that the regulator must be firm in fulfilling its mandate of upholding consumers’ welfare against the assault from big business.


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