ERC told: Hold steady vs SMC

Once the Energy Regulatory Board gives in to the rate adjustment petition of San Miguel Corp. energy unit SMC Global Power, it will erode the last line of defense of consumers against high electricity prices.

“We are noticing that many are already turning their backs on defending consumer welfare, legislators who used to give bold privilege speeches in favor of consumers are disappearing,” consumer groups opposing the San Miguel Corp. petition with the Energy Regulatory Commission said yesterday.

The groups said that considering that higher prices of coal and other fuel may not be resolved until next year or 2024 or in the midterm, the battle for low power prices will persist.

SMC Global Power has a pending petition for a total of P4.80 “temporary” adjustment in contract price with Meralco for its Ilijan natural gas plant and the Sual coal plant.

San Miguel’s power unit has threatened to abandon its PSAs with Meralco if the ERC will not grant its petition which consumer groups compared to blackmail.

“Electricity pricing is all about public service and the common good which makes it necessary to resolve the PSA issue in favor of consumers,” civic organization Power for People Coalition indicated.

“P4P said the straight pricing method cushioned prices of electricity in the Metro Manila area from spikes and now they wanted to remove it,” P4P convenor Gerry Arances said.

Surprise move

Back in 2019, when Meralco started the straight pricing scheme, it was noticed that the two-part pricing equation was not fair. It was seen as disproportionately slanted in favor of fossil fuel use since fuel cost is allowed as a pass-through to consumers.

Renewable energy does not rely on fuel and its pass-on cost only involved currency revaluation.

At the time of the bidding, renewable energy producers are not ready to compete, thus the PSAs were won by San Miguel Corp.

Stakeholders were surprised then that SMC, even with the use of coal as a fuel, made an offer based on straight pricing.

“We, the consumer representatives, actually have many questions about the bid but representatives of SMC told us not to worry and that it should not be considered a problem,” Arances recalled.

“Eventually it applied for an escalation of the contract price which we did not oppose since the PSA provided for it since we know that global costs are rising,” he added.

“The plea for an adjustment of the actual rates in the contract, however, is a different issue since it violates the contract itself,” he indicated.

The contract is based on straight pricing with escalation so revising the price is not allowed.

Based on the PSA between Meralco and SMC Global Power, the only way for SMC Global Power to end its contract with the distribution firm is for it to be declared in default and thereafter pay a hefty P255 billion penalty.

P4P said the ERC should direct Meralco to use the penalty it will collect from SMC Global Power to absorb additional costs from the emergency PSAs it will acquire and thus prevent a spike in monthly bills.

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