33 SMC power deals ‘invalid’

PSAs of four units of SMC Global Power also have contracts that the Supreme Court voided in a landmark 2019 decision for not following the legally-mandated competitive selection process.

September 17, 2022

Aside from the two controversial power supply agreements with Manila Electric Co. which San Miguel Corp. energy arm SMC Global Power wanted to be amended and are the subject of consumer protests, at least 33 other PSAs should be under Energy Regulatory Commission scrutiny for being invalid.

PSAs of four units of SMC Global Power also have contracts that the Supreme Court voided in a landmark 2019 decision for not following the legally-mandated competitive selection process.

Consumer group Power for People Coalition discovered that some are still in effect “and contributing to the spike in power rates in various parts of the country.”

Consumer groups earlier identified the use of a two-step pricing scheme in PSAs as the culprit for the spikes in power rates in different parts of the country.

SMC Global Power wanted to amend the contract of its units South Premiere Power Corp. which runs the 1,200-megawatt Ilijan natural gas plant and the Sual coal plant of San Miguel Energy Corp. which are both based on straight pricing that does not allow pass-on costs.

P4P wrote ERC last Friday to identify at least 28 of the 90 PSAs declared as invalid by the Supreme Court on 19 September 2019, which remain in effect. P4P also discovered 30 other PSAs as having the same characteristics that the SC ruling voided.

P4P said a total of 120 deals were ordered to comply with requirements under the competitive selection process.

According to P4P, among the invalid PSA that remains active is between Zamboanga City Electric Cooperative and San Miguel Consolidated Power Corp. which contributes to 62.7 percent of Zamboanga City’s power, charging ₱10.57 per kilowatt hour in August.

Among the anomalous PSAs are San Miguel Energy Corporation’s pacts with Peninsula Electric Cooperative, Camarines Sur II Electric Cooperative, Nueva Vizcaya Electric Cooperative, Isabela II Electric Cooperative, Ilocos Sur Electric Cooperative Inc., Pangasinan III Electric Cooperative, Tarlac I Electric Cooperative, and Clark Electric Distribution Corp.

San Miguel Consolidated Power Corp. also has deficient deals with Pangasinan III Electric Cooperative, Zamboanga Del Sur I Electric Cooperative, Agusan Del Sur Electric Cooperative, Misamis Oriental I Rural Electric Service Cooperative, Davao Del Norte Electric Corporation, Cotabato Electric Cooperative Inc., Zamboanga City Electric Cooperative Inc., Surigao Del Sur II Electric Cooperative, Cotabato Electric Cooperative Inc.; and Tarlac I Electric Cooperative.

SMC unit Masinloc Power Partners also have similarly questionable deals with Kalinga, Apayao Electric Cooperative; Abra Electric Cooperative, Pangasinan III Electric Cooperative, Mountain Province Electric Cooperative, Ilocos Sur Electric Cooperative, Ilocos Sur Electric Cooperative, Ilocos Norte Electric Cooperative, La Union Electric Cooperative Inc., San Jose City Electric Cooperative, Camarines Sur II Electric Cooperative, and Pangasinan Electric Cooperative Inc.

Yet, another affiliate Limay Premiere Power Corporation’s agreements with Isabela II Electric Cooperative, Camarines Sur II Electric Cooperative, and Camarines Sur I Electric Cooperative appear not to conform with the SC ruling.

PSAs should have stopped

“The Supreme Court ruled that these PSAs should not take effect precisely because they are uncompetitive and expensive. We now see the wisdom of their decision as these two contracts declared null and void by the Supreme Court, are still active and driving up prices for the consumers in Zamboanga City,” Gerry Arances, P4P Convenor, said.

The status of the PSAs was brought up in a dialogue between P4P and the ERC last Tuesday.

Among the participants in the assembly were ERC chairperson Monalisa Dimalanta and all ERC commissioners except one.

“The ERC promised to look into the matter and we want them to act on these additional 30 void PSAs. We are hoping that ERC chairperson Dimalanta would join us in investigating how these companies and distribution utilities involved were able to defy the SC decision three years since consumers ardently fought and won against these anomalous PSAs,” he added.

Arances said it is clear that not the law or consumer welfare, was considered by generation companies and distribution utilities in their pursuit of profit.


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