CA grants San Miguel power unit TRO over supply deal with Meralco

The Court of Appeals (CA) has temporarily suspended the power supply agreement (PSA) between South Premier Power Corp. (SPPC) and the Manila Electric Company (Meralco) following a petition filed by the San Miguel Corp. subsidiary.

The temporary restraining order (TRO) was issued by the CA 14th Division on November 24.

“In view of the circumstances and the interest of the general public, this Court grants the TRO and hereby suspends the implementation of the PSA,” the CA stated. 

“The TRO shall be effective for a period of 60 days from service to respondents.”

The petition stemmed from the Energy Regulatory Commission’s decision on September 29 to reject the pleas of SPPC, San Miguel Energy Corp., and Meralco to hike the generation charge.
 
The companies cited higher prices for coal and natural gas materials used to produce electricity.

The ERC said it denied the plea since it ruled that the agreed price in the PSA is fixed by nature and the grounds for increase cited by SPPC and Meralco were not among the exceptions that would allow for price adjustment.

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

SPCC also said the company did not file a motion for reconsideration because, among others, SPPC would suffer “grave and irreparable injury…(in terms of millions of pesos daily) should it be required to await ERC’s final action…”

The petition urged the CA to grant the rate hike “without prejudice to any further requests for price adjustments for June 2022 onwards.”

ERC Chairperson and CEO Monalisa Dimalanta expressed concern over the instantaneous effect of the TRO. 

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

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

Meralco’s head of regulatory management Jose Ronald Valles confirmed that the company had already received an official copy of the TRO. 

“We are reviewing the resolution in consultation with our counsel to determine the next steps. We have also written the DOE (Department of Energy) to follow up on our previous letter requesting for CSP (competitive selection process) exemption of certain emergency PSAs that are ready to be implemented to shield our customers against volatile and potentially higher WESM prices,” Valles said.

In a separate statement, advocacy group Power for People Coalition (P4P) convenor Gerry Arances described the CA’s action as “absurd and rash.”

“It suspended the PSA between SMC and Meralco, which governs how SMC can supply Meralco with electricity and how much SMC can charge,” Arances said.

“Now that it is gone, how should Meralco act to procure electricity? How much can they charge consumers? How should Meralco react given that the PSA suspension is temporary? This is a desperate move from SMC, and with the CA's approval, consumers are left to foot the bill for SMC's business decisions to use volatile coal and gas in its power contracts.” — VBL, GMA Integrated News