SMC suffers, not public
SMC Global Power is having delusions about insisting that electricity users suffer if it abandons its contracts, when it will have to shoulder the inconvenience that it will cause to households.
Daily TribuneSMC Global Power is having delusions about insisting that electricity users suffer if it abandons its contracts, when it will have to shoulder the inconvenience that it will cause to households.
Consumers must not be made to worry about the additional costs in electricity bills of an SMC Global Power retreat from its power supply agreements with distributor Meralco.
That is if the Energy Regulatory Commission sees through the implementation of the terms of the contract that imposes a heavy penalty of P255.5 billion in case of a unilateral withdrawal that would be tantamount to a default.
The amount to be collected from SMC Global Power will be enough to cover the estimated costs to consumers from replacement emergency PSAs that will cost higher.
Electricity bills are estimated to cost electricity users P25.8 billion more for the remaining seven years of the deal, considering the replacement PSAs when the San Miguel Corp. energy arm makes good its threat to withdraw from the PSAs on 4 October.
SMC Global Power is arm-twisting the ERC to grant a P4.80 per kilowatt total increase in the contracted price, or it unilaterally walks out of the supply deal, which the company warned will mean higher costs to consumers.
The added costs that can be passed on to consumers are estimated at P1.6 billion for one month if the replacement power is obtained from the spot market.
An additional P12.6 billion is expected if a competitive selection process is conducted for a one-year replacement of the SMC deals.
The estimate is that the replacement PSAs will have a rate of P8/kWh under a one-year contract compared to SMC Global Power rates of P6/kWh.
A long-term PSA replacement is expected to fetch P6.8959/kWh. SMC argues that a new deal remains higher compared to P6.3340/kWh if it obtains the ERC approval for a rate adjustment due to "change in circumstances."
SMC subsidiaries South Premiere Power Corp. and San Miguel Energy Corp., administrators of the 1,200-megawatt Ilijan natural gas and 1,200-MW Sual coal-fired power plants, respectively, sought approval from the ERC for a six-month relief.
A stakeholder said considering the forecasted thin supply margin in the coming months, a complete shutdown of the operations of SPPC and SMEC, with a total of 1,000 MW of capacity, may compromise supply adequacy and result in brownouts
Not if the surcharges on SMC Global Power as provided in the PSAs are applied.
In the "Termination upon Event of Default" provision of the PSA, a unilateral pullout makes SMC Global Power liable for P255.5 billion, which is required to be paid in full, within 15 days that the demand for payment is made.
Based on the terms in the PSA, the agreed damages "upon the occurrence of a Power Supplier Event of Default," or when SMC Global Power fails to deliver on its commitments, "Meralco shall be entitled to liquidated damages, in lieu of all other damages to which it may be entitled in the amount of P100,000 per megawatt per day of the contract capacity for the remaining term of the agreement."
The penalty is computed at P100,000 a day for 1,000 megawatts multiplied by seven years, which is the remaining duration of the PSA.
A former Department of Energy official said that the competitive selection process was designed to favor electricity users and not big businesses.
SMC Global Power is having delusions about insisting that electricity users suffer if it abandons its contracts, when it will have to shoulder the inconvenience that it will cause to households.
