SMC says court rules vs ERC on power rate hike

SAN MIGUEL Corp. (SMC) on Wednesday said the Court of Appeals had granted its motion for certiorari voiding the decision of the Energy Regulatory Commission (ERC) that denied its subsidiaries’ electricity rate hike petition.

In a stock exchange disclosure, SMC said the 13th division of the appellate court ruled in favor of San Miguel Energy Corp. (SMEC) and South Premiere Power Corp. (SPPC) annulling and setting aside the ERC’s decision for “grave abuse of discretion amounting to lack or excess jurisdiction.”

SPPC is the administrator of the natural gas-fired power plant in Ilijan, Batangas, while SMEC is the administrator of the coal power plant in Sual, Pangasinan. The two units are subsidiaries of San Miguel Global Power Holdings Corp., the power arm of SMC.

The ruling was referring to the ERC decision promulgated on Sept. 29 last year that denied the rate hike petition jointly filed by the SMC units with Manila Electric Co. (Meralco).

“All told, the Court finds that the majority of the ERC gravely abused its discretion when it rejected the joint motion for price adjustment despite the substantial evidence justifying the same,” the appellate court said in a resolution promulgated on June 27.

The joint decision both rendered by the 13th Division of the CA also granted the consolidated petitions for certiorari of SPPC and SMEC, which meant to overturn the ERC’s September decision.

ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta said the commission plans to file a motion for reconsideration through the Office of the Solicitor General.

The CA also granted the motions for price adjustment with provisional authority and interim relief without prejudice to any further requests for price adjustments from SPPC and SMEC.

“We have received the [CA decision] in the case involving the claim for Price Adjustment of SPPC and SMEC,” Jose Ronald V. Valles, Meralco’s first vice-president and head of regulatory management, said in a Viber statement.

Mr. Valles said the CA has upheld its initial position that the grant of fuel price adjustment is the least-cost option for consumers rather than sourcing replacement power from the Wholesale Electricity Spot Market (WESM) or other suppliers.

“However, there are some matters in the Decision that we feel need to be clarified. We are consulting with our lawyers on the legal remedies available to us including an appeal to the Supreme Court,” Mr. Valles said.

“To ensure continuity of supply of electricity to our customers and avoid exposure to volatile WESM prices, we shall also start negotiating with Power Suppliers for emergency power supply agreement (PSA) to replace any capacity that we might lose if SMEC terminates its PSA with Meralco as a result of the CA Decision,” he added.

The CA order also granted a permanent writ of preliminary injunction in favor of SPPC but denied the motion for partial reconsideration sought by SMEC.

In January, the 13th Division of the CA issued a writ of preliminary injunction, which indefinitely suspended the power supply agreement of SPPC and Meralco.

However, the CA denied the issuance of a hold order sought by SMEC but granted its motion to consolidate the case with SPPC.

The denial of the joint rate increase has forced Meralco to secure an emergency power supply agreement (EPSA) with generation companies, which is much higher than its contract with SPPC. The contract with SPPC was forged in 2019 at P4.2455 per kilowatt-hour.

Ms. Dimalanta said the commission still needs to study how the recent CA ruling would affect the emergency power supply agreement entered into by Meralco to partly cover the supply it lost from SPPC.

Meanwhile, Gerry C. Arances, executive director of Center for Energy, Ecology, and Development (CEED), said the CA failed to uphold the interest of consumers and justice with its recent decision.

“The court effectively releases SMC from any consequences from breaking a contract simply because it is not earning enough from a commitment it has made voluntarily. We hope that the court will reconsider, and we will file a motion for reconsideration to give the justices another chance to live up to their name,” Mr. Arances said. 

The CA ruling is the latest development in the deal that power supplier SPPC and electricity distributor Meralco in May last year jointly asked the ERC to approve at a higher rate.

SMEC and Meralco sought a similar rate increase in May last year before the ERC, which the regulator also rejected in September last year.

In August last year, San Miguel Global Power said its units SPPC and SMEC had incurred a combined loss of P15 billion. The rate increase was meant to recover part or P5 billion of the units’ losses.

The company cited a “change in circumstance” when surging fuel costs breached the price range contemplated during the execution of the contracts with Meralco. However, the ERC denied the petition, saying this had no basis as the PSA is a fixed-rate contract. — Ashley Erika O. Jose