Ironclad decision

While protection of consumer welfare was foremost in the recent decision of the Energy Regulatory Commission, the agency said it ruled strictly on what “is clearly laid down in the power supply agreement, awarded under the competitive selection process, and in law.”

ERC, on Monday, dismissed the petition for a P4.80 increase in the contracted PSA rate between San Miguel Corp. energy arm SMC Global Power and Meralco.

The strict adherence to cold evidence was indicated in the 3-2 ruling that defeated the petition to revise the otherwise fixed tariff which was designed to prevent pass-through costs in which the power plant operators can tag on additional costs to the monthly bills.

The main points cited by ERC in denying the rate hike petition were that the price in the PSA is fixed and that SMC Global Power can’t invoke “change in circumstances” for even a temporary increase since the PSA holder was required to assume all risks related to “market conditions and market realities”.

ERC said its decision to deny the petition was “in keeping with the Commission’s mandate to protect consumer interests as provided under the Electric Power Industry Reform Act.”

ERC, in resolving the SMC Global Power petition, said it is not “blind to the woes and difficulties faced by consumers and businesses alike but it needs to rule and decide objectively and to uphold the sanctity of contract.

“Preserving the PSA under the approved terms requires nothing less than ensuring respect for transparency, fairness, and accountability,” according to ERC.

It added that the parties in the contract entered the PSA “on their own free will, “without pressure is intervention from anyone.”

ERC said the existence of the contract prompted the decision.

“Granting the price adjustment would render this Commission in contempt of the very PSA it approved, which clearly provides no room for price adjustment.”

On the contrary, the PSA guaranteed the supply of energy to “consumers from the nominated plant — the Wholesale Electricity Spot Market or any other source at a fixed contract price provided under the PSA.

Thus, it said the decision to deny the price adjustment is consistent with the principles and mandate of the Commission in the EPIRA to guard against market abuse.

Another issue ERC considered is making sure that prices of electricity are transparent and reasonable “in a regime of free and fair competition and full public accountability.”

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