Conglomerate San Miguel Corp. which has a dominant presence in the energy sector wanted to have its cake and eat it too with regards to the power supply agreements.
Facing a snowballing opposition mainly from consumer groups, SMC backpedaled its earlier threat to unilaterally terminate the power supply agreements. It said vaguely in a statement it will “do everything we can to make sure Meralco’s energy supply is not disrupted.”
The Energy Regulatory Commission, voting 3-2 on Monday, dismissed the petition of the conglomerate’s energy unit SMC Global Power to raise the rates of the Ilijan and Sual plants by a total of P4.80 per kilowatt hour for five months to allow the company to recover P5 billion.
SMC claimed P15 billion in losses from the higher cost of coal and the dwindling supply from the Malampaya natural gas field which is being disputed by consumer groups that are saying that the corporate powerhouse had not produced to back its assertion.
SMC Global Power added it will pursue other legal remedies to “allow us to sustainably provide for the increasing power needs of our country while meeting our obligations to our various stakeholders.”
While issuing the vow that it will not deprive the grid of electricity supply, its various energy units indicated an interest in participating in the auction that Meralco called for expensive emergency PSAs to provide electricity that will be taken out of the grid, of about 1 gigawatt if the SMC ends its PSAs.
SMC through the emergency PSAs thus may just get what it wanted which is a higher rate than what the ERC had disapproved.
Securing emergency PSAs is a contingent measure for Meralco to prevent power outages in case of a huge supply withdrawal from SMC.
The bidders for the supply of a total of 1,070 megawatts of power are SEM-Calaca Power Corp. (200 MW); GNPower Dinginin Ltd. Co. (300 MW); Masinloc Power Partners Co. Ltd (250 MW); SMC Consolidated Power Corp. (200 MW), and South Premiere Power Corp. (120 MW).
Masinloc, SMC Consolidated, and SPPC are all affiliates of the Asian conglomerate.
Consumer groups have demanded that SMC be blacklisted from PSA bids since it is unreliable in terms of complying with provisions of the supply deal.
SMC should instead be made to respect what is contained in the PSA that it cannot alter the price of electricity agreed in its and which SMC Global Power bid to elbow out competitors in the deal using the straight pricing scheme.
Having realized that it made a very low offer that it now complains is causing it losses, it runs to the regulator for an adjustment of a fixed amount in the deal.
The PSA has provisions for delinquents including the payment of a steep penalty of about, P255 billion if it ends the PSAs.
Since SMC Global Power has two contracts that it threatens to terminate unilaterally, its liability with Meralco can run up to P500 billion for the duration of the seven-year contracts.
The amount would be more than enough to cover the excess electricity charges on the consumers through the emergency PSAs.
There should be no other recourse for SMC but to follow its contracts.