SCUTTLEBUTT

Monalisa’s agony

Energy sector insiders were mostly forlorn over the decision of Energy Regulatory Commission (ERC) Chairperson Monalisa Dimalanta to step down, as she had demonstrated a commitment to reforming the energy sector that her predecessors lacked.

Nosy Tarsee obtained information from an industry insider that while Dimalanta was associated with a large conglomerate, having worked with it, she signed several decisions that conflicted with her rumored backer.

“I do not know if this affected the relationship,” the source said.

Conglomerate San Miguel Corp. was pinpointed as being behind the pressure on Dimalanta to resign. She still had four years, or until 2029, at the helm of the energy sector regulator.

It was revealed that two of the ERC commissioners were also linked to the supposed backer of Dimalanta, but “they quickly gravitated toward” the forces that wanted Dimalanta out of ERC.

“These two fought Mona every step of the way,” the source said.

“I would not be surprised if RSA (SMC head Ramon S. Ang) arranged for her to leave,” the source added.

The suspicion is hard to dismiss. Sometime in 2022, Dimalanta clashed with SMC’s energy unit, Global Power.

The conflict was believed to have led to a consumer group petitioning and succeeding in having Dimalanta suspended for six months.

The friction began after the ERC, acting as a collegial body, denied Global Power’s petition for a temporary rate increase.

Sometime in 2022, SMC said it needed a temporary “equitable” relief from soaring prices.

Over six months, SMC sought to recover P5.2 billion from electricity consumers so it could continue sourcing fuel and fulfill its power supply contract with Meralco.

SMC wanted to amend its tariff and collect an additional P4 per kilowatt-hour (kWh) for the Sual coal plant and an additional P0.80 per kWh for the Ilijan natural gas facility.

It was clear from the start that SMC may decide to terminate the power supply agreement without ERC approval due to its alleged staggering losses.

If the ERC decided in SMC’s favor, other power companies could also apply for a temporary tariff adjustment since they were in the same boat with the soaring prices.

The complication arose from the two SMC power plants having straight-pricing contracts that did not allow adjustments to the fixed charges.

The terms and conditions of the contracts were unambiguous. SMC was aware of the commercial risks associated with the power supply contracts, and their bids were intended to reflect those risks.

Other power companies that spotted the contract terms either dropped out of the competitive selection process or submitted bid that were more grounded in reality, inevitably losing out to SMC.

Giving in to SMC’s petition for a “temporary rate increase” would have passed on the financial penalties for bad business decisions to the innocent Filipino consumers.

“Temporary and partial relief” does not automatically mean one-time. It could continue or recur once a legal precedent had been set.

SMC and other independent power producers (IPPs) could continue to seek tariff relief from the ERC whenever they incurred significant losses.

More to the point, such adjustments would undermine the sanctity of contracts, the integrity of the bidding process, and the credibility of SMC’s other supply contracts, all of which significantly impact the consumer welfare.

Meralco said electricity consumers would inevitably suffer if SMC pulled out of their deal. It seemed the message was that IPPs could unilaterally end a supply agreement when it no longer suited its business interests.

In October 2023, ERC rejected the temporary power rate hike petition. ERC said SMC should be reminded of its obligations under the PSA (power supply agreement), “which they had entered into voluntarily.”

Subsequently, SMC went to the Court of Appeals instead of challenging the ERC decision. The CA then issued a temporary restraining order, followed by a permanent injunction, which blocked the ERC ruling.

The bottom line is that SMC was able to circumvent the provisions of its contract and do as it wished with the court decision.

Dimalanta may have seen the big picture and made the right calls, which was not how the powers that be wanted things to be run at ERC.