Oligarchs clawing back (3)

Questions raised on SMC’s proposed adjustment of its generation tariff with the Energy Regulatory Commission through an adjustment of the charges in the Power Supply Agreement with Meralco should make the regulator think twice.

ERC deciding in favor of SMC would encourage other power companies to apply for temporary tariff adjustment.

Power for People Coalition, led by its member organizations and renewable energy advocates led by the Philippine Movement for Climate Justice objected to SMC Global Power’s rate increase petition with the ERC.

The groups said SPPC and SMEC both have power supply agreements with Meralco which can only be changed by circumstances beyond human control.

SPPC has argued that the restrictions on gas supply brought about by the depletion of the Malampaya gas fields are such a change in circumstance which justifies their proposed price hike, while SMEC is using higher coal prices in their application.

“Experts knew as early as 2015 that the Malampaya gas fields might be depleted by 2024. And everyone knows that the price of coal fluctuates, as with all other fossil fuels. Did these companies ignore the realities of the fossil fuel market so they can offer a low price at first and then increase it later as it is trying to do now? Consumers should not pay for this,” P4P Convenor Gerry Arances said.

Wrong message sent

Under the Electric Power Industry Reform Act of 2001 power utilities were required to provide the lowest cost of electricity possible, to be secured through a transparent bidding process.

Price adjustments in PSAs avoid the required public bidding as the contract immediately comes into force.

Consumer groups worry that should the ERC allow SPPC and SMEC to increase power rates, it will send the wrong message that energy companies can evade the spirit of the law and pass on all their costs to consumers.

As such, it will encourage other energy companies to recklessly quote low prices during a bid and then adjust these prices later, guaranteeing their profits while burdening consumers.

Consumers should not be made to pay more by power companies and distribution utilities claiming to have lacked foresight in gas price and supply projections, consumer rights groups contend during an Energy Regulatory Commission hearing or a price adjustment petition of the SMC subsidiaries.

Hold gun on ERC’s head

The intent to arm-twist the government is evident as SMC suggested it may terminate the power supply contract if it fails to get ERC’s approval on its tariff increase petitions.

It contended that it direly needed the ERC adjustments to allegedly cover its staggering losses.

Granting higher rates to money-losing contracts goes against the business regimen and doing so would open the way for four independent power producers to seek tariff relief as they are in a similar fix as that of the SMC power unit.

Following the principle of fairness and “equitable” relief, they can “pass through” high fuel costs to electricity consumers regardless of the rates stated in their contracts.

When SMC and its IPPs bid for Meralco contracts, the terms, and conditions were very clear and they knew the commercial risks that came with the power supply contracts.

The bids they submitted were supposed to reflect these risks.

(To be continued)

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