ERC, SMC energy officials risk possible graft raps

Excellent Energy Resources Inc. and Masinloc Power Partners Company Ltd. are two companies operating under the auspices of business giant San Miguel Corporation.

Last year, EERI and Masinloc participated in a public bidding to supply the Manila Electric Company electricity for 2024 until 2044. Meralco does not produce electricity; it distributes it to its subscribers.

EERI won the bidding, having offered to supply electricity to Meralco at P4.1462 per kilowatt hour, an amount far cheaper than the current P10.4612 per kWh charged by Meralco.

That price offered by EERI is also cheaper than the P4.30 per kWh sold by the Sual coal plant in Pangasinan operated by San Miguel Energy Corporation and the Ilijan Power Station in Batangas owned by South Premiere Power Corporation, a subsidiary of SMC.

The cheaper price offered by EERI would have translated to less expensive electricity bills for households and small businesses in the Philippines.

Unfortunately, the public was in for an unpleasant surprise.

It turned out that after EERI won the contract to supply energy to Meralco, EERI wasn’t so sure about the viability of the price it quoted in the public bidding.

According to SMC, the selling prices of both Sual and Ilijan are too low for the two plants to recover fuel costs. This, in turn, means that under the contract it won in the public bidding, EERI will be selling power to Meralco at a loss, because EERI’s quoted price is far less than those offered by Sual and Ilijan.

Why did SMC, through EERI, offer to supply power to Meralco at a loss? Didn’t SMC study its figures before it participated in the public bidding? What SMC did does not sit well with its reputation as an established business conglomerate in the country.

Just as many feared, SMC petitioned the Energy Regulatory Commission for permission to make adjustments in the contracted price EERI offered in the public bidding it won. Stripped of its rhetoric, SMC wants to make substantial changes to the long-term contract it bid for and won, long after the contract was perfected, and in disregard of settled expectations from the public.

In fine, SMC wants the ERC to give EERI the go-signal to collect an additional P5.2 billion over a six-month period. By way of justification, SMC cites “soaring coal prices and unilateral gas supply restrictions.”

SMC also claims that the price adjustment is needed to enable EERI to continue sourcing fuel and to comply with its power supply contract.

If the ERC allows the adjustments sought by SMC, the electricity bills of all households and small businesses in the country will surely rise exponentially. That’s bad news, indeed, for millions of Filipinos who are still slowly recovering from the adverse economic situation brought about by the Covid-19 pandemic.

Adding insult to that injury is the fact that San Miguel Global Power Holdings Corporation, the energy unit of SMC’s independent power producers, posted a net income of P17.9 billion from 2021 until the first quarter of 2022.

Goodness gracious! What happened to SMC’s annual claim to being a model corporate citizen of the Philippines?

The consumer group Power for People Coalition argues that if SMC is unable to sell electricity at the price it offered in the public bidding, then the remedy is to impose an appropriate fine on SMC for its improvident and unjustifiable contractual breach, and to hold a new public bidding.

At the end of the day, the public should not be made to bear the unpleasant consequences of SMC’s reckless business decisions.

Bidding too low in a contract imbued with a very high degree of public interest, then winning it, and then pressuring the government for adjustments, all smack of illegality.

If the ERC allows SMC to get its way in this power supply deal, consumer groups and public interest advocates should file anti-graft cases against officials of both entities.

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