Home run for SMC

It cannot get any better for San Miguel Corp. (SMC) which is priming up its energy unit as a main profit driver.

The Court of Appeals (CA) in a 27 June ruling directed the Energy Regulatory Commission (ERC) to act on the request for price adjustments filed by San Miguel Global Power Holdings Corp. (SMGP) in 2022 for its two units — South Premiere Power Corp. (SPPC) and Sual Power Inc. (SPI).

SPPC operates the Ilijan gas plant, while SPI, the former San Miguel Energy Corp., runs the Sual coal plant in Pangasinan.

The decision preceded the “irrevocable resignation” of ERC chairperson Monalisa Dimalanta despite her fixed term running until 2029.

Dimalanta had been under huge pressure ever since the regulatory agency she headed rejected the temporary rate increase application of SMGP.

“The Energy Regulatory Commission is directed to immediately implement our decision dated 27 June 2023 and, without further delay, act on the motions and make the necessary computations and breakdown of the appropriate amount for payments to petitioners,” the CA decision read.

In 2022, SPPC and SPI sought temporary price adjustments under their 2019 power supply agreements (PSAs) to recover higher fuel costs due to “a change in circumstances.”

The ERC rejected the petition because the contracts that both SMC units held were based on a fixed rate that could not be adjusted, even for the recovery of higher costs.

SMGP had sought relief from the ERC to recover P15 billion in losses suffered by its power plants.

SPPC and SPI then went straight to the CA to contest the ERC decision. The court issued a temporary restraining order (TRO) and later a permanent injunction against the ERC ruling. The CA eventually reversed the ERC’s ruling on 27 June 2023, citing “grave abuse of discretion.”

The Solicitor General and energy sector groups cried overreach in the CA imposition on the ERC.

The bottomline: SMC will likely get in full a total of P34 billion in incremental fuel costs recovery and will have a straight arrow of an ERC head out of the way.

How lucky, indeed, can SMC get.