TRO on power deal may burden users – Marcos
MANILA, Philippines — Warning that ordinary consumers risked paying higher electricity prices, President Ferdinand Marcos Jr. on Sunday said he hoped the Court of Appeals (CA) would reconsider its issuance of a temporary restraining order (TRO) suspending the implementation of the power supply agreement (PSA) between South Premiere Power Corp. (SPPC), a unit of conglomerate San Miguel Corp. (SMC), and Manila Electric Co. (Meralco).
“[Regarding] the [TRO on the] implementation of the PSA between Meralco and San Miguel, it is unfortunate that this has happened, [as] it will cause further dislocations and possible price increase for power,” the president said in a statement.
“We hope that the CA will reconsider. And include in their deliberations the extremely deleterious effect this will have on power prices for ordinary Filipinos,” he added.
The TRO request stemmed from the Energy Regulatory Commission’s (ERC) rejection of the joint SMC-Meralco petition for a 30-centavo per kilowatt-hour increase to offset soaring fuel prices as a result of Russia’s invasion of Ukraine.
SMC had argued that there was a “change in circumstance” after the PSA was signed in 2019, citing skyrocketing coal and fuel prices. Due to the surge in the cost of imported coal, for example, it became more expensive to operate its power plant. But it was unable to pass on the added cost to consumers because the ERC rejected its proposed rate increase.
From 2021, SMC said its power entities had so far incurred P15 billion in losses for operating its coal-fired power plant in Sual, Pangasinan, and its natural gas-fed facility in Ilijan, Batangas.
The regulatory body, in its Sept. 29 order, ruled that the agreed price in the PSA was fixed in nature, and the grounds for increase cited by SPPC and Meralco were not among the exceptions that would allow for a price adjustment.
SMC appealed the ERC rejection and the CA last week granted the TRO requested by SMC.
This move could lead to a spike in the monthly power bills of Meralco customers, a concern raised by the ERC.
The ERC cited a portion of the CA ruling dated Nov. 23: “… 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 TRO shall be effective for a period of 60 days from service on respondents.”
ERC Chair Monalisa Dimalanta expressed “grave concern on the instantaneous effect” of the temporary suspension of supply agreements.
In a statement, she said this would expose about 7.5 million Meralco customers in Metro Manila and adjacent areas to higher electricity prices as the fixed rates in the current PSAs would no longer be enforced.
According to the regulatory body, the fixed-price PSA of Meralco with SPPC covered 670 megawatts (MW) of supply and Dimalanta stressed that such agreements “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.”
Nonetheless, the ERC expressed confidence that the CA “will accord great respect, if not finality, to the regulator’s factual findings because of its special expertise over the energy sector.”
With the suspension of the PSA due to the TRO, Meralco might be forced to buy more expensive electricity to supply customers in its franchise area.
Meralco said it would consult its counsel to explore the next steps in light of the CA decision and would follow up with the Department of Energy (DOE) on its prior request to immediately secure additional power supply without going through the required competitive selection process (CSP).
“We have written the DOE to follow up on our previous letter requesting for CSP exemption of certain emergency PSAs to shield our customers against volatile and potentially higher WESM prices,” said Jose Ronald Valles, first vice president and head of regulatory management of Meralco.
Consumer group Power for People Coalition (P4P) had lambasted the CA for what it described as an “illogical and anticonsumer” resolution on the issue.
“The TRO is 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,” Gerry Arances, P4P convener, said in a statement.
Terry Ridon, convener of Infrawatch PH, a think tank focusing on resolving infrastructure underdevelopment in power, transport, telecommunications, water, public works, and natural resources, said the president should allow full judicial proceedings to take their course and “his views may ably be represented through ERC lawyers and the Solicitor General.”
Ridon added that the TRO would allow continuing discussions on the fair and reasonable rates which could be imposed on the Meralco franchise area given elevated fuel and coal prices in the last few months.
“This provides a way forward toward a determination on whether the price proposal in the joint petition constitutes the least cost to consumers in comparison to other prospective proposals extraneous to the current power supply agreement, such as prices through emergency procurement or the spot market,” Ridon added.
According to Dimalanta, the ERC would defer to the appellate court on their next move, but it already referred the issue to the Office of the Solicitor General.
The decision of the ERC rejecting the joint petition of SMC and Meralco for a rate hike was a close 3-2 vote. The two dissenting ERC commissioners — Alexis Lumbatan and Marko Romeo Fuentes — noted that, under the SMC-Meralco petition, Meralco customers would have to pay an additional P5.2 billion over a six-month recovery period.
Under scenario two, where ERC rejected the petition, and SMC withdrew from its PSA, leaving Meralco to secure a one-year emergency supply deal, Meralco consumers would have to pay an additional P12.6 billion for electricity. A similar scenario where the power would be sourced through a competitive selection process would result in an additional burden of P25.8 billion for Meralco customers.
A third scenario that has Meralco sourcing power from the electricity spot market will burden consumers with P1.6 billion every single month.
The two dissenting commissioners pointed to an internal simulation done by the ERC’s Regulatory Operations Service (ROS) to determine “which available option best serves and protects the consumers.”
The ROS in its response, through Alvin Jones Ortega, chief of the tariffs and rates division, confirmed that granting the price adjustment remained the cheapest option,” the dissenting ERC commissioners said.
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