SMC must pay debts

For about 14 years, the country’s biggest power plant, Ilijan in Batangas, which has a rated capacity of 1,200 megawatts (MW), has San Miguel Corporation’s (SMC) South Premiere Power Corporation (SPPC) as its operator under a contract that transferred last June its ownership to the conglomerate’s energy unit.

The court, however, issued an injunction on the transfer since debts with the government needed to be settled.

The state-owned Power Sector Assets and Liabilities Management Corp. (PSALM), which owned the power plant until SPPC assumes as owner, said the SMC unit owes the government a staggering P34 billion in arrears on generation payments.

SPPC has a supply contract with Meralco that specified the amount of electricity it buys.

However, the independent power producer administrator agreement with the government provided that SPPC should pay the government at the average rate in the electricity spot market.

SMC recently sought an adjustment of its agreed rate with Meralco, which was arrived at in a competitive selection process with the Energy Regulatory Commission (ERC) to allegedly cover the increases in fuel prices.

PSALM said it has been billing SPPC with the correct amount based on its contract with the government, but it only pays an amount based on the Meralco contract price.

Thus far, it has racked up debts of P34.04 billion, as of 30 June 2022.

Initially, SPPC argued that it learned of its arrears only through the newspapers, but PSALM contended that it sent a number of demand letters on the unpaid billings.

PSALM said it even submitted samples of the demand letters sent to SPPC during a 26 February 2020 Energy committee hearing, particularly the letters dated 9 August 2019, 3 September 2018 and 9 May 2018.

PSALM had argued that SPPC’s computations of generation payments based on its power supply agreement with Meralco are not provided in its contract with the government. PSALM added it is not a party to the deal between Meralco and SPPC.

PSALM’s records showed SPPC remitted a total of P285.37 billion from the start of the agreement in 2010 until 30 June 2022. However, the agency said that it is clear in the contract that the generation charge should be based on WESM prices.

PSALM has filed a complaint against SPPC in the Regional Trial Court of Mandaluyong City to determine, among others, the correct computation of the generation payments.

Ilijan’s ownership transfer to SPPC scheduled last June “was done in compliance with the Writ of Injunction issued by RTC Mandaluyong and without prejudice to the eventual outcome of the complaint,” which is now in the pre-trial stage, according to a PSALM update.

Ilijan is a strategic source of energy, and it is shifting to liquefied natural gas after it ends its fuel contract with Malampaya this year.

SMC should resolve its issues with the government and remove uncertainties, since the Ilijan plant is crucial in ensuring that the periodic power interruptions, particularly during the high-demand months of summer, do not recur.

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