Vicious cycle repeats

Vicious cycle repeats | Daily Tribune

San Miguel Corp. is banking on its proven formula of employing the courts to get the Energy Regulatory Commission do what it wants and further improve its bottom line while covering up its wrong priorities and decisions.

Its energy units are again prominent participants in supply contracts with the Manila Electric Co., including in the shortfall created when San Miguel Global Power units unilaterally backed out of power supply agreements, or PSAs.

In 2019, Meralco opened contracts using the straight-pricing method in which prices of electricity could not be subjected to periodic increases, thus benefiting electricity users and in line with the least-cost electricity provision of the Electric Power Industry Reform Act.

Later, SMGP petitioned the ERC for a temporary rate increase to cover P5.2 billion in losses from wrong business decisions.

ERC’s decision was for the SMC unit to follow the contracts with Meralco that its subsidiaries South Premiere Power Corp. and San Miguel Energy Corp. obtained in a competitive selection process.

Under those contracts, SMGP could not get out of the deals on pain of huge penalties, including P250 billion for each of the PSAs if it defaulted on its committed supply.

Instead of appealing the decision with ERC, SMGP went straight to the Court of Appeals, which promptly issued a temporary restraining order, or TRO, to stop the regulator from doing its duty of preserving the sanctity of contracts.

SMGP then used the TRO to unilaterally rescind its PSAs, resulting in Meralco incurring a supply deficiency.

The hefty fines provided in the PSAs were meant to protect consumers from price spikes since they would be passed on, as reductions, in the monthly bills.

Instead, SMC got away with any consequence for its arbitrary move since the TRO was upgraded to a permanent injunction and just last December, the CA ruled with finality to void ERC’s decision on the straight-pricing PSAs.

Strangely, SMGP was smug about its move to cancel its contracts with Meralco confident that the CA will not go against its petition to stop the ERC landmark ruling.

Had the CA ruled otherwise, SMGP would have to pay the fines and penalties specified in the PSAs.

Eventually, SMC abandoned all its PSAs with straight pricing with Meralco without any backlash.

Electricity users were thus exposed to the court decision since they will have to pay the reimbursement of the losses SMC incurred through bad business decisions and not the judges.

The fear is that since SMC’s energy unit is again sweeping the supply contracts of Meralco, it will seek to maximize gains to recoup its previous poor performance.

Being overstepped is the consumers’ right to affordable electricity which is guaranteed under the EPIRA.

SPPC recently cornered the PSA for the supply of 1.2 gigawatts or 1,200 megawatts of electricity that takes care of the entire output of its Ilijan plant.

Up for bidding is another 1.8 GW which SMGP power plants are also aiming for.

According to the consumer group Power for People coalition, or P4P, the released terms of reference, or TOR, for the new PSAs “risk resulting in higher electricity rates.”

It paves the way for passed-on charges to consumers and is favorable to fossil fuel plants, the majority of which are owned by SMC.

Thus electricity prices will again be extremely vulnerable to global market fluctuations, the P4P said.

The consumer group chided Meralco for having walked back from making ways forward in the past and its responsibility to provide pro-consumer services and electricity is not a one-off thing.

With practically nothing, not the government nor the courts, which can stand in the way of SMC in obtaining what it wants, the cycle of Filipinos subsidizing its errors will be a recurring nightmare.