‘TRO, game over for consumers’

With the issuance of a TRO, the issue is now between ERC and SMC Global Power.

The Court of Appeals has handed San Miguel Corp. practically a free hand on what it wanted to do regarding two controversial power supply agreements with distributor Manila Electric Co., industry sources said. “If the court issues a preliminary injunction order, then practically it’s game over and SMC gets what it wants,” an industry source indicated.

“The upper hand is with San Miguel,” according to the energy sector insider.

“With the issuance of a TRO, the issue is now between ERC and SMC Global Power and for the meantime, while SMC holds a TRO, it can pull out from the contract with Meralco, after the period provided under it,” the source added.

The conglomerate’s unit SMC Global Power petitioned the Energy Regulatory Commission to terminate the PSAs since these are based on fixed pricing that prevented it from periodically adjusting the electricity rates, thus shielding electricity users from billing shocks.

The Energy Regulatory Board dismissed the petition early last month but the court reversed the decision through the TRO which means higher electricity rates are in the offing.

In an announcement on 4 October, ERC dismissed the petition of SMC Global Power units Southern Premiere Power Corp, and San Miguel Energy Corp. for a temporary P4.80 per kilowatt-hour increase in monthly charges.

Investors have complained about the courts’ indiscriminate issuance of TROs as derailing legitimate business deals.

Then-president President Rodrigo Duterte had warned courts not to inflict TROs or injunction orders on key government or private projects.

Warning vs ERC

SMC Global Power earlier warned that it will withdraw from the PSAs if ERC denies its petition.

It claimed running up $15 billion in losses due to the spike in coal prices and the restrictions in the supply of the Malampaya natural gas project.

Absurd and rash

Consumer groups labeled the TRO as “absurd and rash” since it will allow SMC to suspend the PSAs between SMC and Meralco.

The groups said when the PSAs are terminated, Meralco may look for alternative sources of electricity which will result in higher electricity bills.

They added that it is a desperate move from SMC, and with the CA’s TRO, “consumers are left to foot the bill for its failed business decisions.”

At the end of the day, all of this will depend on what SMC will do, an industry source said.

“The other parties have zero control over the situation as the issue is not with the CA,” the source added.

Interim deals eyed

If DoE does not approve Meralco’s petition for emergency PSAs, it will be forced to go to the spot market. The distributor has a limited choice in this, according to another source.

Meralco, meanwhile, said it received an official copy of the court’s TRO and it is reviewing the resolution in consultation with the company’s counsel “to determine the next step” of the dominant distributor.

It also wrote the DoE to follow up on a previous letter requesting for competitive selection process exemption of certain emergency PSAs.

The TRO, relying solely on the statements of SPPC in their petition, cited the “simulations made by Meralco which were independently corroborated by Regulatory Operations Service, (as) reasonably true and valid.”

This misinterpretation of the simulations of ERC’s Regulatory Operations Service will be clarified when ERC submits its comments to the Court. ERC is confident that the Fourteenth Division of the Court of Appeals, consistent with existing jurisprudence, will accord great respect, if not finality, to the regulator’s factual findings because of its special expertise in the energy sector.

Legal eagle shares view

“The TRO only means that the previous ERC order cannot be implemented. A status quo exists,” according to former Chief Presidential spokesperson Salvador Panelo.

“What happens next will be up to the court,” he indicated.

“The TRO was issued to allow the court to hear the case, to give it time to study whether or not the SMC petition has merit,” he added.

The Daily Tribune tried to reach Malacañang for comment but it has yet to reply as at press time.

The court, the source said, can issue a preliminary injunction similar to what SMC Global obtained in stopping the government from proceeding with the termination of a Independent Power Producer Administration agreement.

In 2015, the government-owned Power Sector Assets and Liabilities Management notified SMC Global Power that it was terminating the IPPA due to a dispute on the computation of the government’s share from natural gas generation.

SMC’s energy arm insisted that the generation charge that is remitted to the government should be based on the fixed rate under the PSA between SMC Global Power unit SPPC and Meralco.

The government holds, however, that the charge is based on the average price at the WESM.