Judgment day for SMC
It is ERC’s mandate to not only decide on the Joint Motion to the best interest of consumers, but also to impose fines or penalties for any non-compliance with or breach of the EPIRA.
Daily TribuneIt is ERC’s mandate to not only decide on the Joint Motion to the best interest of consumers, but also to impose fines or penalties for any non-compliance with or breach of the EPIRA.
Civic groups expect the Energy Regulatory Commission, in a likely ruling today, not to only reject the petition of San Miguel Corp. unit SMC Global Power for an adjustment in the power supply agreements that will raise power rates by P4.80 per kilowatt hour but also impose sanctions on the conglomerate.
SMC faces a hefty P255.5 billion fine under an "Event of Default" provision of the PSA which will apply if it makes good on its threat to unilaterally withdraw from the contracts with Meralco.
In its Joint Manifestation and Comment submitted to the ERC, the consumer groups said generation companies and distribution utilities alike should not be allowed to enter into PSAs, "placing a low bid only to later on move for a price adjustment."
SMC Global Power units South Premiere Power Corp, the operator of the Ilijan natural gas plant and San Miguel Energy Corp which runs the Sual coal pant have PSAs with Meralco but it sought adjustments with ERC after it declared P15 billion in losses due to the rising prices of coal and supply restrictions from the Malampaya natural gas project.
The energy firm threatened to unilaterally terminate the PSAs if ERC will not grant its sought price relief.
In its court submission, the Center for Energy, Environment, and Development Incorporated, Philippine Movement for Climate Justice and pro-poor oriented Sanlakas said it is ERC's mandate to not only decide on this Joint Motion to the best interest of consumers "but also to impose fines or penalties for any non-compliance with or breach of the EPIRA (Electricity Power Industry Reform Act), the Implementing Rules and Regulations of the EPIRA, and other rules and regulations which it promulgated or administers as well as other laws it is tasked to implement or enforce."
"Simply put, should applicant SMEC pushes through with its 4 October 2022 withdrawal from the PSA, it should be considered (at) default, for which applicant SMEC should be penalized accordingly. Such penalties should, in turn, be used to reduce generation charges to consumers," according to the document.
According to industry stakeholders, total liability of SMC Global Power would reach P255.5 billion covering the seven remaining years of the contract at P100,000 per megawatt a day.
Oppositors reminded the ERC of Section 43 of the EPIRA which states it is tasked to promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the electric industry.
"Worse, generation companies and distribution utilities should not collude in asking for higher rates to be charged to consumers, while holding above consumers' heads the threat of terminating their PSAs," the manifestation noted.
The actions of the SMC units "blatantly disregarded the policy of the State declared in the EPIRA to ensure transparent and reasonable prices of electricity, and to ensure fairness and competitiveness of electricity pricing."
ERC can act on its own
The groups also cited section 7(d) of the implementing rules and regulations of EPIRA which provided "ERC shall, Motu Proprio, monitor and penalize any market power abuse or anti-competitive or unduly discriminatory act or behavior, or any unfair trade practice that distorts competition or harms consumers, by any electric power industry participant."
The oppositors cited article 14.3.1 of the PSA: "Upon the occurrence of a Power Supplier Event of Default that affects the ability of Power Supplier to supply Meralco with Contract Capacity and Associated Energy in accordance with this Agreement and results in the early termination of this Agreement (and without prejudice to any other provisions of this Agreement prior to such termination), Meralco shall be entitled to liquidated damages, in lieu of all other damages to which it may be entitled in respect of such Event of Default, in the amount of One Hundred Thousand Pesos (P100,000) per MW (megawatt) per day for the remaining Term of this Agreement. Power Supplier shall pay Meralco the amount of such liquidated damages within 15 days after written demand for payment."
"Having established that there are no changes in circumstances as defined in the Applicants' PSA, Applicants should not be allowed to terminate the contract," the manifestation added.
Likewise, the oppositors questioned the "change in circumstances" provision that SMC Global Power invoked in seeking a revision in contracted prices.
"Mere inconvenience, unexpected impediments, increased expenses, or even pecuniary inability to fulfill an engagement, will not relieve the obligor from an undertaking that it has knowingly and freely contracted," according to the groups.
The civic groups' submission added, "fuel price volatility risks brought about by wars or tight supply are events that are neither new nor unforeseeable."
The group wanted the ERC to rule in accordance with its mandate of protecting consumer interest from the aggressive efforts of business firms to maximize their profits.
