Court of Appeals rules in favor of SMC-Meralco power rate hike

By Alena Mae S. Flores – November 25, 2022, 9:25 pm
from manilastandard.net

The Fourth Division of the Court of Appeals issued a 60-day temporary restraining order on the Energy Regulatory Commission’s rejection of San Miguel Corp.’s joint petition with Manila Electric Co. for a rate increase under their 2019 power supply agreement.

SMC Global Power Holdings Corp. confirmed the CA decision in a disclosure to the stock exchange Friday involving the case filed by power unit South Premiere Power Corp. for the 1,200-megawatt Ilijan combined cycle power plant in Batangas province.

“We grant the prayer for TRO, as the petitioner was able to show that the matter sought to be enjoined is a matter of urgency,” the CA said in the decision.

Associate Justice Mary Charlene Hernandez-Azura signed the decision which was concurred by Associate Justices Victoria Isabel Paredes and Florencio Mamauag Jr. on Nov. 23.

SMC earlier warned that unless the implementation of the ERC order was immediately restrained, it would be forced to continue to supply energy to Meralco under the 2019 power supply agreement at a loss, resulting in great irreparable injury.

The CA said the price simulations made by Meralco on the price impact to consumers if the PSA is not approved “are reasonably true and valid.”

“This court finds it just and necessary under the circumstances to grant the TRO in order not to disrupt the basic and essential services being rendered by both the petitioner and Meralco, not to mention the irreparable injury in the amount of millions petitioner is losing as a consequence to its continued adherence to the PSA as ordered by the ERC,” it said.

SPPC incurred losses of P1.04 billion from January to April and was anticipating P1.5 billion losses in May.

“This court empathizes with petitioner’s serious losses, which are capable to render it insolvent due to unforeseeable cost,” the CA said.

The ERC said it received a copy of the TRO after office hours on Nov. 24.

SPPC, in its petition for certiorari, said it did not file a motion for reconsideration of the ERC’s order dated Sept. 29 which denied its rate increase petition because it would suffer “grave and irreparable injury…[in terms of millions of pesos daily] should it be required to await ERC’s final action.”,

It said the ERC acted with grave abuse of discretion in denying its rate increase petition and when it interpreted the rights of SPPC and Meralco under the PSA.

The ERC said in a statement it denied the plea for a price increase as the agreed price in the PSA was fixed in nature, and the grounds for the increase cited by SPPC and Meralco were not among the exceptions that would allow for price adjustment.

ERC chairperson Monalisa Dimalanta expressed concern over the “instantaneous effect of the temporary suspension in the implementation of the PSA based on the TRO.”

Dimalanta said this would consequently expose 7.5 million registered Meralco consumers in the National Capital Region and other areas in Region III and IV to higher electricity prices without preparation, usually observed in case of PSA termination.

“The fixed price PSA of Meralco with SPPC covers 670 MW of supply,” said Dimalanta.

“This, along with the other fixed price PSAs, have been shielding Meralco consumers for the past several months from the volatility of prices from WESM (Wholesale Electricity Spot Market) and automatic fuel pass-through PSAs. If these PSAs are immediately suspended, this brings us precisely to the situation which we at the ERC have sought to avoid with our ruling that required the proper observance of the terms of the PSA, including the contractually-agreed process of termination,” she said.

The ERC said it would clarify the price impact simulations when it submits its comments to the court.

“ERC is confident that the Fourth Division of the Court of Appeals, consistent with existing jurisprudence, will accord great respect, if not finality, to the regulator’s factual findings because of its special expertise over the energy sector,” the regulator said.