SMC still bound by power supply contract

Even if it pushes through with a unilateral pullout from its power supply agreement, SMC Global Power is required under the contract to continue supplying electricity to Meralco until either the Energy Regulatory Commission or an arbitral court makes a ruling on the withdrawal.

A copy of the PSA obtained by Daily Tribune stated that “during the pendency of the ERC proceedings or arbitration under section 16.2, the power supplier (SMC Global Power) shall continue, “so long as payments are current, to perform its obligations hereunder to make available the Contract Capacity and deliver the Associated Energy, and Meralco shall continue to pay all amounts due hereunder in accordance with the provisions of this Agreement.”

The particular provision, thus, will compel SMC Global Power not to cut 1 gigawatt of electricity which it has threatened to stop supplying on 3 October if the ERC does not favor its rate hike petitions.

“For the avoidance of doubt, in case Power Supplier fails or refuses to supply contract capacity and associated energy despite availability, the section 14.3.1 on ‘event of default’ applies.”

A Meralco official told Daily Tribune that whatever happens on 3 October, supply of electricity should not stop since it would be electricity users suffering either brownouts or high cost of power.

“We can assail everybody here but at the end of the day, the welfare of consumers should prevail,” the official said.

SMC Global Power, based on the provisions of the PSA, faces heavy penalties if it makes good its threat to pull out from the PSA.

The company will be liable for a whopping P255.5 billion penalty that has to be paid to power distributor Manila Electric Co.

Penalties also await SMC Global Power if it abruptly stops supplying electricity to Meralco.

“In case Power Supplier fails to deliver the Contract Capacity and Associated Energy to Meralco due to unavailability of supply from its plant, Wholesale Electricity Spot Market, and any other source, Power Supplier shall pay a fine equivalent to P908 multiplied by each megawatt-hour during a day, which will be used to reduce the generation charge to consumers,” a provision in the PSA stated.

Grant increase or else

With ERC are petitions for rate increases of South Premiere Power Corp. and SMC Energy Corporation, both units of SMC Global Power, for a total of P4.80 per kilowatt hour over five months.

The company cited “change in circumstances” for its petitions due to the higher cost of coal in the world market and the supply restrictions in the Malampaya natural gas field.

The PSA listed detailed procedures for the settlement of disputes among which included:

• The ERC has jurisdiction over a dispute between the parties within its administrative authority, any such dispute that is not resolved shall be referred to and shall be heard and resolved by the ERC in accordance with its rules on practice and procedure; and

• Otherwise, the dispute shall be finally resolved by binding arbitration under the United Nations Commission on International Trade Law arbitration rules… The place and seat of arbitration shall be in Pasig City.


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