In issuing a writ of preliminary injunction in favor of a power unit of San Miguel Corp., the Court of Appeals has “blindly swallowed” the conglomerate’s claim that it was “being forced to sell on a negative margin” or a loss.
A power industry source on Sunday told Daily Tribune that the CA — without considering the interest of consumers who will be saddled with high power rates — accepted the arguments of SMC’s South Premiere Power Corp. or SPPC wholly.
The injunction, in effect, suspended SPPC’s power supply agreement or PSA with Meralco, the source said. SPPC operates the Ilijan natural gas plant.
Since the Energy Regulatory Commission dismissed the plea of SPPC and affiliate San Miguel Energy Corp. or SMEC for a temporary rate increase, SMC’s singular pursuit has been to suspend or scrap the PSA, the source said.
To recall, the ERC has maintained that the straight pricing scheme provided under the PSA prohibits a pass-through provision that would allow the company to saddle consumers with add-on costs through their monthly bills.
But the 13th division of the CA said in its resolution that SPPC has found itself in a situation whereby its PSA with Meralco has caused it to suffer “millions (of pesos) in losses every day.”
This “produces an untenable situation because the more the petitioner sells, its business losses become greater,” the court pointed out.
Due process
SMC Global Power Corp., the parent company of both SPPC and SMEC, claimed losses of up to P15 billion due to claimed higher costs of coal and the supply restrictions from the Malampaya natural gas consortium.
The CA averred that the continuation of the PSA deprives San Miguel “of its property without due process of law.”
It added that the “continued implementation of the PSA where the petitioner is compelled to bear the cost of energy supplied to the public on its own without any expectation of a reasonable return on its investments not only deprives the petitioner of its property without due process of law but also takes its private property for public use.”
In its decision to compel SMC to adhere to its PSA with Meralco including its pricing scheme, the ERC pointed out that SPPC willfully bid for the straight-priced contract.
It also pointed out that other power providers that hold fixed-priced contracts with Meralco engaged in supply hedging that prevented them from being affected by sudden spikes in fuel prices.
Only remedy?
The CA admitted in its ruling that the WPI was issued as “a remedy available to the petitioner in order to prevent the continued implementation of the PSA.”
“There is no other ordinary, speedy, and adequate remedy that exists to prevent the infliction of irreparable injury” on SPPC, the court said.
A motion for reconsideration with the ERC, which consumer groups and other oppositors of the SMC petition said was the proper legal move instead of running to the courts, “is not a speedy and adequate remedy because it will not suspend the effectivity of the assailed order,” the appellate court said.
Consumers critical of SPPC had not been allowed to intervene in the case before the CA even if they say they represent the public that would ultimately be negatively affected by power hikes.
The CA, in conclusion, reiterated its statement underlining “that it is prudent for the parties to take their time in finding the most equitable solution in addressing the problem of increased cost.”