Daily TribuneInstead of offering proof, SMC Global Power threatened ERC that it will terminate the PSAs with Meralco which would result in the electricity grid losing a 1-gigawatt hour of power or equivalent to three base load power plants being taken out of the electricity network.
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Failing to substantiate the reasons for its tariff adjustment applications in its power supply agreements, San Miguel Corp. unit SMC Global Power has resorted to blackmailing the Energy Regulatory Commission.
The episode on the threat to deprive the Luzon electricity grid of one gigawatt of supply was all about the SMC group's effort to maximize profits at the expense of consumers who would shoulder the pass-on costs of the price increases.
Consumer groups described the energy arm of the Asian conglomerate as having clutched on straws in substantiating the P15 billion losses and in invoking the "change in circumstances" of the power supply agreement primarily for San Miguel Energy Corp. which operates the Sual coal plant.
In their manifestation with the ERC to sum up their opposition to the SMC, the oppositors indicated that what SMC presented was not a change in circumstances "but rather, a failure on their part to put in place the necessary commodity price risk management to shield themselves from foreseeable volatility of coal prices caused by external disruptions, among others."
In their application, SMEC sought the bulk of the PSA adjustments at P4 per kilowatt hour which would be collected within six months through higher electricity bills.
During the ERC proceedings, SMC offered evidence that indicated it did not exercise due diligence in coming up with its very low offer to corner the PSAs with Meralco.
In the PSA, a change in circumstances occurs when a sudden event turns up that materially increases the operating costs or capital expenditures associated with the power plant or materially and adversely affects its performance of its obligations under the agreement, or the situation causes serious damage to or materially and adversely affected the financial condition of power supplier.
SMEC, in arguing for the substantial rate adjustment, cited negative gross margins of P2.47 billion and a net loss of P5.6 billion for the first half of this year but did not show proof for its claims.
Under the PSA with SMEC, the agreed price for the first contract year is P4.0459 per kilowatt hour subject to 12 percent value-added tax and an annual escalation cost.
"SMEC did not attach in any of its pleadings nor present during the Clarificatory Hearings any financial statement or documents to prove these claims," according to consumer group Power for People.
"It is a basic tenet of evidence that whoever alleges a fact has the burden of proving it because a mere allegation is not evidence," the group told ERC.
SMEC, despite the ample opportunity given it, failed to submit evidence regarding the company's financial health. It did not even submit any basis for the computation of its losses and the proposed price adjustment, the oppositors noted in its manifestation.
During the hearings, SMC presented one witness who did not even explain how the corporate powerhouse missed the unprecedented spike in coal in its business forecast.
He also failed to give substance to the claim of the company and how its service has "become so difficult as to be manifestly beyond the contemplation of the parties, the court or any tribunal should authorize the release of the obligor in whole or in part".
Instead of offering proof, SMC Global Power threatened ERC that it will terminate the PSAs with Meralco which would result in the electricity grid losing a 1-gigawatt hour of power or equivalent to three base load power plants being taken out of the electricity network.
One can't help but imagine SMC holding a gun on consumers' collective heads to get what it needed.
