ERC rejects Meralco, SMC rate hike petition

MANILA, Philippines — The Energy Regulatory Commission (ERC) has denied a joint rate hike petition of Manila Electric Co. (Meralco) and San Miguel Corp. (SMC)’s power units.

Meralco, South Premiere Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC) had jointly filed an application with the ERC for a temporary adjustment in the prices of their power supply agreements (PSAs) signed in 2019 to recover fuel costs amid the unprecedented spike in fuel prices.

“After due deliberation and through evaluation of all arguments submitted and all information gathered by the commission pursuant to its regulatory powers, the commission denies applicants’ joint motion for price adjustment,” the ERC said in an order promulgated on Sept. 29.

The ERC explained that as a prudent business entity, it is expected that the SMEC and SPPC would have risk-mitigating strategies in place to ensure compliance with its contractual obligations.

“This is even more so expected when it enters into long-term contracts imbued with public interest, such as the PSA in this case,” it said.

As for Meralco, the ERC said the power distributor is expected to have exercised prudence in ensuring that its suppliers would have the necessary fuel for the operation of their facilities when it participated in the competitive selection process (CSP) and were awarded PSAs with a 10-year period.

“The fact that the PSA is financial in nature provided Meralco and its consumers the assurance that any fuel supply risk was of no moment and was assumed in full by the supplier,” the ERC said.

“The commission, therefore, cannot afford relief to any party for its miscalculations, imprudence or inadvertence, at the cost of the consumers,” it added.

The ERC said its decision to deny the joint motion for price adjustment is in keeping with its mandate to protect consumer interests, guard against market abuse and ensure transparent and reasonable prices of electricity as provided under the EPIRA (Electric Power Industry Reform Act).

“The commission is not blind to the woes and difficulties by consumers and businesses alike, but it needs to rule and decide on the basis of what is clearly laid down in the PSA awarded pursuant to the CSP policy, and in law,” the ERC said

Of the five ERC commissioners who signed the order, two commissioners – Alexis Lumbatan and Marko Romeo Fuentes – have a dissenting opinion and voted to grant the joint motion.

“The dissenting minority finds it just and necessary under the circumstances to grant the joint motion to cushion the impact of high cost of fuels and so as not to disrupt the basic and essential services being rendered by both Meralco and SPPC/SMEC to the consuming public,” the two commissioners said.

SMC Global Power Holdings Corp. (SMCGP) and Meralco earlier warned of higher rates for customers should their joint petition not be approved.

SPPC and SMEC, administrators of the Ilijan and Sual plants, respectively, had already issued notices of termination to Meralco of their PSAs, citing unexpected and unprecedented “change in circumstance,” including sky-rocketing global fuel prices brought about by multiple factors, such as the war in Ukraine.

The termination is effective starting Oct. 4, if no relief is given, the SMCGP earlier said.

Meralco previously said that preserving the existing PSAs with two San Miguel plants would be the least cost option for its consumers.

The petition, which was filed last May, seeks for a temporary increase for six months for the combined capacities supplied by SMCGP’s Sual Coal Plant and Ilijan Natural Gas plant to Meralco, following the record rise in global fuel prices that were driven by economic and geopolitical forces.

The Power for People Coalition (P4P), meanwhile, called the ERC decision on the petition to raise electricity rates “historic.”

“The ERC’s recent history has made consumers pessimistic about the willingness of the agency to defend consumer rights. We are glad to have been proven wrong in this case,” P4P Convenor Gerry Arances said.

“The vigilance and solidarity with which consumers resisted this threat of higher electricity rates bore fruit with this ERC decision, and we hope this is the start of more pro-consumer outcomes in years to come,” he added.