Clutching at straws

In filing a petition for rate hikes that would result in a spike in monthly bills, SMC Global Power has the temerity of believing that it will eventually get what it wanted without a sweat.

In the decision of the Energy Regulatory Commission dismissing the P4 per kilowatt hour increase petition of SMC Global Power unit San Miguel Energy Corp., which runs the Sual coal plant, it was indicated that the electricity producer did not present proof of losses it wanted to recover.

The ERC turned down the petition of the SMC subsidiary on the ground that it holds a straight energy price PSA that does not allow adjustments. This holds with the ERC decision on South Premiere Power Corp. the P0.80 petition which was also dismissed.

The energy unit of the Asian giant had cited the rising cost of coal for its petition for a five-month increase in the charges of the Sual coal plant.

Oppositors said to prove its claim that SMEC merely submitted “a screenshot” of the global coal market report showing the prevailing prices when it participated in the competitive selection process for the power supply agreement.

SMC then invoked a change in circumstances to seek a revision of the PSA contracted price as coal prices had risen as a result of the Indonesia coal ban and the Russia-Ukraine war.

The change in circumstances provision after the signing of the agreement required “any law coming into effect including the adoption or enactment, or any change or repeal with respect to the imposition of taxes, duties, levies, fees, charges, and similar impositions, including the right to remit or convert currencies” as those that can qualify for a revision of the terms of the contract.

SMEC tried to stretch the definition of the law in the provision raising what it termed as a change in the circumstances period: “From the commencement of the above-mentioned geopolitical events, contrary to fundamental factors affecting system demand and supply, there has been a tremendous and extraordinary rise in the price of coal”.

The oppositors said that none of the circumstances that SMEC mentioned “involved any law coming into effect after the signing of the PSA and that pertained to the imposition of taxes, duties, levies, fees, charges, and similar impositions” to justify a change in circumstances.

The groups challenging the SMC bid to increase power rates indicated that “without explaining and substantiating how these circumstances fall under the definition of change in circumstances in their own PSA, applicants cannot simply refer to this as a “change in circumstances period.”

A review of the PSA that the SMC unit holds also showed that the company can’t invoke “change in circumstances” to rescind the PSA since its definition in the deal does not include changes in fuel costs.

In the straight pricing scheme, the contractor is not allowed to pass on extra costs to consumers through higher electricity bills.

SMC Global Power had warned ERC that if it fails to act on the petition for a rate hike in its two power supply deals and it terminates the PSAs, electricity prices in Metro Manila and nearby provinces could go up by as much as 30 percent starting this month.

Consumer group Power for People Coalition, nonetheless, said it is not the consumers’ or the ERC’s lookout if SMC abandons the PSAs since the penalty that should be collected from SMC Global Power must be applied to electricity bills to cushion the spike in electricity prices without the SMC power plants.

The previous ERC dispensation may have granted the petition without much effort from SMC due to regulatory capture.

Now that the voice of consumers is being listened to, the burden is on those seeking an increase in prices to prove that their petitions are justified.

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