Meralco: Power supply deal with SPPC still suspended

BY LENIE LECTURA – FEBRUARY 2, 2023
from Business Mirror

The Manila Electric Co. (Meralco) said on Wednesday its 670MW power supply agreement (PSA) with South Premiere Power Corp. (SPPC) remains suspended until the Court of Appeals (CA) issues a decision on the petition for certiorari.

Meralco First Vice President and head of regulatory management office Ronald Valles confirmed the receipt of the CA decision granting the writ of preliminary injunction (WPI) sought by SPPC.

“With the WPI, implementation of the PSA will remain suspended until such time that the Court resolves the Petition for Certiorari filed by SPPC,” he said via SMS.

Valles reiterated that preserving the PSA serves the best interest of Meralco’s 7.6 million customers, as this would protect them from potentially higher electricity rates.

“The company will continue exhausting all measures and work with relevant industry stakeholders to find ways to mitigate the impact of this WPI and ensure the continued delivery of stable and reliable power to its customers.”

The PSA involves the supply of power to Meralco from SPPC’s Ilijan gas-fired power plant. However, the resolution does not terminate the PSA. Instead, the issuance of the WPI is meant to allow SPPC and Meralco to negotiate the terms of the PSA.

“To be clear, the grant of WPI suspends the continued implementation of the PSA but does not terminate the same. This is to allow the parties to negotiate the terms of the PSA. The parties are directed to enter into good faith negotiations as stated in paragraph 11.4 (d) of the PSA,” Associate Justice Mary Charlene Hernandez-Azura said in an 8-page order promulgated on January 25.

SPPC—a unit of SMC Global Power Holdings Corp. of conglomerate San Miguel Corp.—and Meralco shall agree on a “satisfactory solution” regarding the amendment of their PSA to SPPC’s commercial position prior to such change in circumstances, including an adjustment of the contract price.

If the parties fail to reach an agreement within 60 days from the start of negotiations, SPPC would be entitled to terminate the PSA.

To recall, SPPC secured a temporary restraining order (TRO) that stopped the Energy Regulatory Commission (ERC) from enforcing its September 2022 order. The TRO then led to the cessation of the 670MW supply that SPPC was obligated to deliver under its PSA with Meralco.

The ERC order denied the rate hike joint petitions of SPPC and San Miguel Energy Corp. (SMEC), and Meralco for price adjustments to serve as temporary relief covering a combined P5.2 billion in losses incurred from January to May 2022 due to the unprecedented spike in fuel prices.

Separately, the ERC said on Wednesday that its next step is to consult with government lawyers.

“We are seeking guidance of our counsel, OSG [Office of the Solicitor General], on this latest resolution of the 13th Division of the Court of Appeals that granted the permanent injunction in favor of SPPC, while the 16th Division earlier denied the injunction plea of SMEC.

As of today, the OSG has not yet received a copy of the Writ of Preliminary Injunction, if indeed it has already been issued to SPPC. The 13th Division ordered SPPC to post a P100 million bond to cover for any and all damages that may result from the WPI should the court later decide against SPPC,” said ERC Chairperson Monalisa Dimalanta.