No exemptions

The PSAs of both SMC subsidiaries with Meralco are based on straight pricing that does not allow costs to be passed on to consumers except for exceptional instances.

By TDT

5 days ago

Indications from the Energy Regulatory Commission are that it will give weight to preserving the integrity of the competitive selection process rather than give in to the threats of San Miguel Corp.

ERC said it is in the final stages of drafting a decision before the 4 October threat of SMC Global Power to withdraw from the power supply agreements of its Ilijan and Sual power plants with Meralco.

The unit of the Asian conglomerate sought a five-month increase in power bills of P4.80 era kilowatt hour or nearly an additional P500 monthly for the average household electricity user to recover P5 billion out of what it claimed as P15 billion losses.

Its unit Southern Premiers Power Corp. which runs Ilijan is seeking 80 centavos per kilowatt hour more in its contract price while San Miguel Energy Corp. which operates Sual is asking for P4 per kilowatt hour.

SPPC said it is losing from the supply restrictions of the depleting Malampaya natural gas field while SMEC said it needed to recover losses from the high cost of coal in the world market.

The PSAs of both SMC subsidiaries with Meralco are based on straight pricing that does not allow costs to be passed on to consumers except for exceptional instances.

The PSAs provided for a change in circumstances provision that SMC Global Power invoked but it was clear in the contract that changes in fuel prices and anticipated events such as the effect of the reduced natural gas supply are not among the instances included.

An ERC official said part of the review of the SMC Global Power petition is its implication on “similarly-situated PSAs underwritten by the other power utilities.”

Based on the PSA, the only way that SMC Global Power can unilaterally terminate its contract would be through a default that will require compensating Meralco P255 billion which is the estimated cost of the lost business through the early rescinding of the PSA.

Aside from the SMC units, the Lopez Group’s First Gen and the Ayala’s ACEN have similar contracts with Meralco. An official of ACEN called out the ERC that its ruling should apply to all the PSA contractors.

ERC’s decision will clarify the CSP “observed by Meralco and the terms of the PSAs, if these are being observed and implemented by the parties,” an official of the agency said.

The ERC walks a thin line since whatever the outcome of its review of the SMC petition will have an impact on the already limited budget of Filipino households.


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