SMC uses TRO as cover to drop power service deal
SMC’s decision caught Energy Regulatory Commission chairperson Monalisa Dimalanta by surprise, saying she was not informed of the move
Photograph courtesy of Meralco
San Miguel Corp. has let the hammer fall yesterday as its energy arm San Miguel Global Power Corp. notified the Manila Electric Co. that it will officially terminate a 670-megawatt power supply agreement.
Termination of the deal will force distributor Meralco to source electricity from the spot market, raising the specter of a spike in electricity prices this month.
The PSA covers the deal between SMGP subsidiary South Premiere Power Corp. which runs the Ilijan natural gas plant and electricity distributor Meralco, which earlier warned of a rise in electricity bills in case of a unilateral termination.
The termination of the contract, SMC claims, was supported by the Court of Appeal's issuance of a 60-day temporary restraining order against the Energy Regulatory Commission's denial of its power rate hike petition.
The TRO suspended the power supply agreement including penalties in case of a unilateral termination of the deal.
Under the PSA, unilateral termination of the PSA triggers a default that will result in SMC Global Power being liable to pay upfront P255 billion as the estimated cost of the PSA in the remaining seven years of its term.
The SMC decision caught Energy Regulatory Commission Chairperson Monalisa Dimalanta by surprise as she told Daily Tribune yesterday that the agency has not been informed of the move.
Dimalanta said the ERC will review the action of SMC and the applicability of the TRO on it.
"Their action shows they believe they can (end the PSA). We have a different view, but given the TRO issued by the Court of Appeals, we have to consult with the Office of the Solicitor General if this cessation of supply now renders moot the case filed by SPPC," according to the ERC chief.
On Sunday, SMC gave Meralco an offer in which it will "make the full capacity of its Ilijan natural gas plant available to Meralco for a fraction of its capital cost."
SMC said in a statement that its offer will help keep electricity prices as low as possible for consumers while ensuring a steady supply of power in the coming months.