Gov’t calls SMC power unit’s offer to settle fee dispute ‘preposterous’

THE Power Sector Assets and Liabilities Management Corp. (PSALM) has rejected a “preposterous” settlement put forward by South Premiere Power Corp. (SPPC), a unit of San Miguel Corp. (SMC), the latest twist in a long-running dispute over generation fees owed by the 1,200-megawatt Ilijan power plant in Batangas City.

The Department of Finance (DoF) said in a statement Wednesday that PSALM rejected SPPC’s offer on Jan. 11 because it contained a “preposterous condition” not previously mentioned when the payment scheme was first proposed in March 2020.

The DoF said SPPC’s Jan. 11 letter had asked PSALM to “cede control and ownership of the Ilijan power plant to SPPC” ahead of schedule, once its fees are fully settled. The DoF was citing a report by Irene J. Besido-Garcia, president and CEO of PSALM.

The dispute centers on generation fees due to PSALM under contested interpretations of SPPC’s independent power producer administration (IPPA) agreement.

The plant was originally scheduled to be turned over to SPPC under the original IPPA deal. The proposed turnover could happen well before that date if SMC should complete its payments in advance.

The initial offer, made in a March 6, 2020 letter, was “without prejudice to the PSALM’s legal position (regarding) the ongoing dispute on the generation payments,” according to Ms. Besido-Garcia. It made no mention of an accelerated turnover schedule.

The dispute over fees was brought to court in September 2015, with PSALM claiming it was owed P23.94 billion in generation payments. The court has yet to decide which interpretation of the IPPA it will uphold.

PSALM argued in the statement that generation payment is the cost of energy based on a specific formula under the IPPA agreement, which is different from the payments SPPC needs to make under the IPPA deal if it is to emerge as Ilijan’s owner upon expiry of the agreement.

“[The latest offer of the SPPC for a faster turnover will] preempt any ruling of the judicial court on the matter and will undoubtedly prejudice PSALM’s legal position,” Ms. Garcia was quoted as saying in a Jan. 18 response to SPPC.

“PSALM should not be obligated to fast-track or amend its current arrangements in the Energy Conversion Agreement (ECA) under another contract with a different party in order to accept SPPC’s offer,” the DoF said.

It said Ilijan’s current independent power producers, the National Power Corp. and KEPCO Ilijan Corp., have agreed to the 2022 turnover.

SMC had not responded to a request for comment at deadline time. —