Make SMC liable

Emergency power supply deals have been obtained as a backup in case corporate giant San Miguel Corp.'s energy arm cuts off one gigawatt of electricity, which was its threat, if the Energy Regulatory Commission fails to rule in its favor in the P4.80 "temporary" rate hike petition.

The petition had placed the ERC in a difficult spot, since allowing the petition of the SMC unit would trigger similar pleas from power supply agreement holders, since they are in the same boat as SMC in being saddled with rising costs.

Energy stakeholders said that SMC Global Power surprised many in its extremely low bids for the PSAs, particularly for its coal plants, considering the rising global prices of fossil fuel.

SMC gave an assurance that it can comply with the straight pricing scheme under the PSA.

A source in the industry said that SMC Global Power did not find opposition when it sought escalation to account for rising costs, which was provided in the contract, but "a revision of the price is a different issue since it would violate the essence of the competitive selection process."

Thus, SMC Global Power's notice to terminate its PSA, which unfortunately it can only do, by being in default and shelling out P255 billion to practically buy its contract, which still has seven years in it.

A review of the PSA indicated that the company can't invoke "change in circumstances" to rescind the PSA, since its definition in the deal did not provide for changes in fuel costs.

In the straight pricing scheme, the contractor is not allowed to pass on the extra costs to consumers through higher electricity bills.

SMC Global Power had warned ERC that if it fails to act on the petition for a rate hike in its two power supply deals and it terminates the PSAs, electricity prices in Metro Manila and nearby provinces could go up by as much as 30 percent starting October.

Consumer group Power for People Coalition, nonetheless, said it is not the lookout of consumers or the ERC if SMC abandons the PSAs, but it should be the corporation's responsibility on what happens next after it walks out.

P4P indicated that the penalty should be collected from SMC Global Power and applied on electricity bills to cushion the spike in electricity prices without the SMC power plants.

The next step, according to the civic group, should be the ERC banning SMC from the energy sector "for being unreliable."

It boils down to being a conscientious member of the private sector as against satisfying an insatiable greed for profit.