SMC: No Worries
Power Energy

SMC: No Worries

Oct 10, 2022, 4:07 AM
Rose De La Cruz

Rose De La Cruz

Writer/Columnist

After pushing so hard to get a relief—through a 30 centavo per kwh price adjustment—to cover for the billions of pesos losses incurred (from higher coal and fuel costs) with its 2019 power supply agreement (PSA) with Meralco, San Miguel Corp. president Ramon S. Ang, assured his employees there would be no lay-offs or downsizing in operations.

SMC Global Power Holdings Corp said on Tuesday: 

“in the meantime, we will do everything we can to make sure Meralco's energy supply is not disrupted. Despite the present challenges, we will never withhold our available power capacity to the detriment of the country and the consumers.”
“However, given the circumstances, we will continue to explore 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.”

Ang-- the day after the Energy Regulatory Commission’s ruling disallowing SMC-Meralco’s planned rate hikes-- reassured worried senior staff that everything would be okay despite the unforeseen circumstances that led to their 2019 PSA with Meralco becoming a money-losing affair. “Don’t worry. Look at me, do I look worried. Pera lang yan. Kikitain natin yan ulit,” he told his staffers in his usual jovial manner with hands gesticulating expansively, said Biz Buzz of Inquirer.

Ang was particularly generous with his reassurance to staffers who were involved in formulating the 10-year fixed price power supply deals when the pandemic and Russia’s invasion of Ukraine hit.

“The temporary relief would have enabled us to preserve the last remaining fixed-rate PSAs of Meralco that are responsible for keeping power rates in Metro Manila low compared to other parts of the country, said an SMC statement.

SMC also did not terminate its PSA with Meralco as many feared.

ERC’s decision

ERC Chair Monalisa C. Dimalanta told reporters on Tuesday that petition (for relief) was denied because Meralco and SMC had a financial contract with a fixed price and that both parties did not exhaust all options before seeking a rate increase.

“The cost of operations of a particular plant is really not that material to the fulfillment of obligation of the supplier to Meralco because they are permitted to get from another source,” she said noting that Meralco’s estimate on the impact of the PSA termination is higher than the ERC estimate.

In August, SMC said that its subsidiaries-- South Premiere Power Corp (SPPC) and San Miguel Energy Corp. (SMEC), the administrators of the coal power plant in Sual, Pangasinan, and natural gas-fired power plant in Ilijan, had incurred a combined loss of P15 billion. Ang earlier estimated that they had absorbed P10 billion in losses and were just looking to recover P5-billion loss.

But Dimalanta said SMEC and SPPC only submitted an unaudited financial statement to show the losses.

Consumers hail ERC decision

Consumer groups, meanwhile, welcomed the ERC decision.

“We welcome the decision of ERC to deny the rate hike petition of Meralco and SMCGP. ERC’s ruling stands on solid ground and serves as a firm reminder to power industry players of their obligations and responsibilities to the nation. PSAs, unlike ordinary commercial contracts, are imbued with public interest and thus subject to strict regulation by the government.

Under this financial agreement, power suppliers must bear all the risks of market volatilities,” said Renato Redentor Constantino, executive director of the Manila-based climate and energy policy group Institute for Climate and Sustainable Cities (ICSC).

The Power for People Coalition (P4P) hopes the latest ERC decision is “the start of more pro-consumer outcomes in the years to come.”

“The ERC’s recent history has made consumers pessimistic about the willingness of the agency to defend consumer rights. We are glad to have been proven wrong in this case. The vigilance and solidarity with which consumers resisted this threat of higher electricity rates bore fruit with this ERC decision,” said Gerry Arances, P4P Convenor.

Kuryente.Org expressed disappointment with ERC commissioners Alexis Lumbatan and Marko Fuentes who favored granting the petitioners’ rate adjustment.

“For what we saw was an amateur of a dissenting opinion on the commission’s landmark denial of the petition by corporate giants San Miguel and Meralco to amend their contract and protect their profit amid a season of economic woes for the whole country,” said Kuryente. Org coordinator Nic Satur, Jr.

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