ERC puts foot down in SMC power rate hike petitions
It is also a financially firm contract since the difference between the strike price agreed between the parties and the WESM spot price will be on the account of the (PSA holder) for all periods and for the amount of energy specified in the PSA,” the ruling stated
The Energy Regulatory Commission in its two decisions denying the petitions for rate increases of San Miguel Corp. power generation units San Miguel Energy Corp. and South Premiere Power Corp. dismissed all of the arguments that the conglomerate raised to support its bid.
The ruling, released late Monday night, pointed out that the two generation companies under SMC energy arms San Miguel Energy Corp. and South Premiere Power Corp. hold a financial contract that does not allow adjustment or pass-through costs or tagging the increase in rates on monthly bills.
The PSAs do not require exclusive sourcing of electricity from the power plants of the contractors but commit both companies to a fixed volume of supply that can be obtained "from the nominated power plant, the Wholesale Electricity Spot Market or any other source."
An overriding intent of the ERC in its ruling was upholding the sanctity of a contract.
"The role of the regulator is always a balancing act. The Commission deliberated on many occasions fully conscious that the consequences of the ruling go beyond the businesses of the immediate parties, but will extend further and demonstrate how we, in the power industry, honor the sanctity of contracts," ERC chairperson Monalisa Dimalanta said.
The nature of the contract was "clearly discussed in the Commission's orders dated 10 December 2019 and 16 June 2020", according to the ruling.
According to the decision, "the unrestrained nature of such supply obligation from any source" and not limited to the designated power plant "is further underscored by the fact that the PSAs do not provide for any outage allowance and that supply availability is guaranteed at the rate allowed and approved by the Commission."
ERC added that the PSAs ensured that the contractors "shall provide the contract capacity and associated energy at the guaranteed price."
"It is also a financially firm contract since the difference between the strike price agreed between the parties and the WESM spot price will be on the account of the (PSA holder) for all periods and for the amount of energy specified in the PSA," the ruling stated.