The Department of Energy intends to take a direct hand in resolving what looms as a potential crisis, which is the threat of SMC Global Power to pull the plug on Meralco for one gigawatt of electricity by 3 October.
The energy arm of Asian conglomerate San Miguel Corp. has threatened to withdraw from the power supply agreements of its units Southern Premiere Power Corp., which runs the Ilijan natural gas plant, and San Miguel Energy Corp, which operates the Sual coal plant.
SMC Global Power is seeking a temporary adjustment of a total of P4.80 per kilowatt-hour for about five months to cover portions of its claimed P15 billion losses.
Consumer groups dispute this claim, saying that two other contractors, AC Energy Corp. of the Ayala Group and First Gen of the Lopezes, have similar contracts with Meralco, but they have not indicated plans to seek an ERC relief — not yet, at least.
An ACEN official stated that ERC should ensure a level field, and how the SMC affiliate is treated should also apply to other PSA contractors.
Energy stakeholders have warned that the ERC giving in to the SMC petitions for adjustment will open the floodgates for similar rate adjustment petitions, since rising fuel prices are the problem of not just SMC Global Power.
DoE Secretary Raphael Lotilla said the agency wanted to know where it can "clarify" based on its mandate regarding the conduct of the competitive selection process.
The CSP is the bidding scheme that SMC Global Power joined to acquire the PSAs with Meralco by flooring its offer.
Stakeholders said the company running to the regulator later on to amend the terms of the PSA defeated the purpose of the CSP.
The PSA deal provided for straight pricing that does not allow pass-on costs to consumers.
The contract provided a provision for change in circumstances, but does not cover global shifts in fuel prices.
The pricing method is favored by consumer groups, saying that it had kept prices low amid the inflation pressures from the Eastern European conflict and the persistent lockdowns in some parts of the world to control the pandemic.
"We are looking at what is really fully covered by the mandate of the regulatory agency, the ERC, and what is properly the policy, which is covered by the DoE's mandate," Lotilla said during a recent Senate hearing.
"We will be issuing clarifications on this particular point to guide the public and the private sector," he added.
Under the Electric Power Industry Reform Act, the DoE takes care of policies, while ERC regulates the energy sector.
The DoE thus can look into the CSP implementation, which is a crucial policy in ensuring the least cost of electricity is provided to consumers.
ERC then ensures that the rules are followed.
The PSA amendment issue should be resolved in a way that the confidence of investors in the sanctity of contracts and fair play remains intact.
