Marcos: TRO on power service issue harmful to the public

No less than President Ferdinand Marcos Jr. has urged the Court of Appeals to reconsider its decision to issue a temporary restraining order that favored San Miguel Corporation over a recent Energy Regulatory Commission order.

The TRO was issued a day after SMC filed its petition to stop the ERC order which, according to some in the legal circles, was unusually swift considering the notoriety of the judiciary in being snail-paced with its actions.

Suspended through the TRO was ERC's dismissal of the conglomerate's energy unit SMC Global Power's implementation of a power supply agreement between SMC affiliate South Premiere Power Corp. and Manila Electric Co.

Marcos, in a statement released by the Office of the Press Secretary, described the TRO on the implementation of the PSA between the two companies as "unfortunate," expressing fear that it will be an additional burden to Filipinos.

"(Regarding) the implementation of the PSA between Meralco and San Miguel, it is unfortunate that this has happened. It will cause further dislocations and possible price increase for power," he said.

"We hope that the CA will reconsider and include in their deliberations the extremely deleterious effect this will have on power prices for ordinary Filipinos," he added.

The ERC had expressed concern regarding the instantaneous effect of the temporary suspension of the PSA, which it said, will expose 7.5 million registered Meralco consumers in the National Capital Region and other areas in Central Luzon and CALABARZON to higher electricity prices.

If the PSAs are immediately suspended, terms of the PSA, including those on the agreed process of termination, are disregarded, the ERC said.

Consumers to suffer

The ERC reiterated that the court's hold order, effective for 60 days, will impact the "consumers directly and our economy ultimately."

An industry source said the court order handed SMC the opportunity to withdraw from the power supply agreement, which incidentally in the PSA requires a 60-day notice to the regulator and Meralco, the electricity distributor.

In a text message, ERC chairperson and CEO Monalisa Dimalanta said the power watchdog supports the President's call to look into the reversal of the TRO.

"We share in the President's hope for a reversal of the TRO issued by the CA. The grave implication of the TRO is not lost on the President. There are established procedures for suspending or terminating power supply agreements in general, precisely because these are not typical commercial agreements where the consequences are borne only by the parties," Dimalanta explained.

"The impact of the action of PSA parties falls on consumers directly and on our economy ultimately. This is why PSAs with distribution utilities are regulated by ERC. PSAs have been recognized in our laws as contracts imbued with the public interest. This fact the Chief Executive sees very clearly," Dimalanta said.

Dimalanta added the ERC "remains confident" that the CA will reconsider its order once the Office of the Solicitor General files the necessary pleadings on behalf of the ERC.

Citing the TRO copy dated 23 November, the ERC said that the appellate court granted the suspension that will be effective for 60 days from the time the decision is served the respondents but it noted that the decision was based solely on the statements of the SMC power unit.

The petition for certiorari filed by SPPC claimed that the ERC "acted with grave abuse of discretion in denying its rate increase petition when it interpreted the rights of SPPC and Meralco under the PSA."

The Daily Tribune reached out to SMC and Meralco for comment on the President's reaction.

ERC denied the petition citing the fixed term in the PSA and the grounds for the increase cited by SPPC and Meralco were not among the exceptions that would allow for price adjustment.

The nature of the 10-year PSAs, according to Dimalanta, was intended to provide a barrier for Meralco consumers from external shocks or market volatilities.

To secure the PSAs with Meralco, SMC Global Power subsidiaries SPPC and San Miguel Energy Corp. purportedly submitted extremely low offers despite knowing that the deal is based on straight pricing that does not allow pass-through of costs to consumers.

Later on, realizing that losses are piling, reaching as much as P15 billion, as a result of fixed pricing, it petitioned the ERC for a revision of the fixed terms in the PSA.

Wrong assumptions

"The ERC will file through its counsel, the Solicitor General, once we are ordered by the Court of Appeals a comment to the petition," Dimalanta said in response to a Daily Tribune query.

"Parties to the case will be ERC, Meralco, National Association of Electricity Consumers for Reforms Inc. and Uriel Borja, a consumer advocate," she added.

Dimalanta said the regulator will raise, among other issues, the supposed wrong assumptions the court used in granting the TRO which are the simulations of different price scenarios supplied by Southern Premiere Power Corp. in its TRO petition.

The ERC said the CA issued the TRO relying solely on the statements of SPPC in their petition.

SPPC's petition referred to simulations made by Meralco which were independently corroborated by the Regulatory Operations Service and which the court assessed as "reasonably true and valid."

This misinterpretation of the simulations of ERC's Regulatory Operations Service will be clarified when ERC submits its comments to the Court, according to the ERC's statement.

"ERC is confident that the 14th Division of the Court of Appeals, consistent with existing jurisprudence, will accord great respect, if not finality, to the regulator's factual findings because of its special expertise over the energy sector," Dimalanta said.

In a letter to consumer groups to clarify some issues they raised on the price scenarios, ERC said SMC Global Power used a number of assumptions "which are not explained, supported or justified."

"ROS, on the other hand, used data on the submissions of the petitioner as part of its monthly Uniform Reportorial Requirement for the period January to May 2022," ERC indicated.

"We noted inconsistencies in the application of assumptions across the scenarios, and this was observed to have unduly affected the rate impact simulations," the letter maintained.

The petitioners also used a spot market price forecast of P8.9404 per kilowatt hour that the ERC pointed out as "the basis for such forecast not having been established."

In contrast, the ROS used a weighted average Wholesale Electricity Spot Market rate of P7.6659 which was based on the actual price until May.

ERC indicated that SMC will go to great lengths to squeeze out of a tight financial situation of its own doing.

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