SMC unit, Meralco to renegotiate PSA

South Premiere Power Corp. (SPPC) and the Manila electric Co. (Meralco) will proceed to renegotiate their power supply agreement (PSA) after the 13th Division of the Court of Appeals (CA) issued a writ of preliminary injunction (WPI).

“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.

the appellate court said SPPC—A unit of SMC Global Power Holdings Corp. (SMCGP) 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 they fail to reach an agreement within 60 days from the commencement of the negotiations, SPPC will be entitled to terminate the PSA.

At the same time, the court ordered SPPC to post a P100-million bond.

Prior to the issuance of the WPI, 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 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.

According to the erc, their plea for price increase was denied because the agreed price in the PSA is fixed in nature, and the grounds for increase cited by SPPC and Meralco were not among the exceptions that would allow for price adjustment.

the same court directed SMEC, Meralco, and erc to file a comment after the Sixteenth Division of the CA granted SMEC’S motion to consolidate the subject case with that of SPPC.

“Without necessarily giving due course to the petition, respondents are directed to file a comment (not a motion to dismiss) within a non-extendible period of 10 days from notice. Petitioner may file a reply within a non-extendible period of five days from receipt of the comment,” the CA resolution stated.

It can be recalled that the 16th Division of the CA issued a resolution last January 13, denying the petition for the issuance of a tro filed by SMEC that was meant to suspend the implementation of the September 29, 2022 order of the erc. However, it allowed the consolidation of the two cases.

As of press time, Meralco and the erc have yet to comment.