Consumer group: SMC can’t escape accountability

SMC should have accountability if it will pursue a threatened pullout from power supply agreements with Meralco on 4 October, consumer groups demanded yesterday.

“The electricity involved in the deal is such a big chunk of supply for Luzon and it will disrupt the whole system,” consumer group Power for People Coalition said.

“When a large power plant is taken off the grid, it causes rotating brownouts, so there must be an accountability there,” P4P convenor Gerry Arances said.

Arances added there should be an implication in their action particularly in making a very low offer for the PSA.

“Electricity consumers and the economy will have to be protected,” according to the civic group head.

SMC affiliate SMC Global Power wanted to recover P5.2 billion from electricity consumers within six months based on its petition with ERC.

SMC’s unit had sought to amend its tariff and collect an additional P4 per kilowatt hour for the Sual coal plant operated by San Miguel Energy Corp. and an additional 80 centavos per kWh for the Ilijan natural gas facility of South Premiere Power Corp.

SMC Global threatened to pull out from the two PSAs if ERC does not grant the tariff adjustment plea.

Ball in ERC’s court

ERC granting additional rates to money-losing contracts is unprecedented, never mind that it is temporary, according to a stakeholder.

He added that the ERC allowing a rate adjustment will open the floodgates to similar claims from four independent power producers “who are in the same boat as SMC.”

“If ERC decides in favor of SMC, these other power companies can also apply for temporary tariff adjustment,” an official of an electricity producer said.

P4P’s Arances said if SMC indeed pulls out, “the automatic measure of the Energy Regulatory Commission will be to mandate a new auction,” most likely for an emergency PSA.

Emergency PSAs are higher in rate in nature since the providers will price in the immediate nature of augmenting supply, according to Arances.

In terms of negotiations, it will be the supplier which gets the upper hand.

“That emergency PSA will have to be approximated with the penalty that will be imposed on SMC Global Power for pulling out of their PSAs,” Arances said.

A copy of the PSA between SMC Global Power and Meralco obtained by Daily Tribune showed that the only way that the SMC energy arm can unilaterally rescind its contract would be through a “Termination upon an event of default.”

Such a situation will result in the imposition of SMC Global Power of a hefty fine of P255.5 billion considering the remaining seven years left in the PSA set for termination.

“If the power plant operator wants to dispose of the contract because of what it claimed as unforeseen conditions, well and good, but it should be banned from the power industry for being unreliable,” Arances averred.

P4P had indicated it should not be electricity consumers who should suffer the consequences of the pullout.

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