power and water

CA rules Meralco-San Miguel power supply deal still suspended

Ralf Rivas

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CA rules Meralco-San Miguel power supply deal still suspended

POWER. Electricity lines and meters.

LeAnne Jazul/Rappler

While the suspension stays, the Court of Appeals directs Meralco and San Miguel unit South Premiere Power Corporation to negotiate the terms of their supply deal

MANILA, Philippines – The suspension of the power supply deal between the Manila Electric Company (Meralco) and South Premiere Power Corporation (SPPC) remains in place.

SPPC is a subsidiary of SMC Global Power Holdings Corporation under Ramon Ang’s San Miguel.

The 13th Division of the Court of Appeals (CA) granted the petition for a writ of preliminary injunction filed by SPPC, which means the company’s deal to supply 670 megawatts to Meralco from its Ilijan gas-fired power plant is still suspended.

In a resolution on Wednesday, January 25, Associate Justice Mary Charlene Hernandez-Azura emphasized that the decision does not terminate the power supply agreement. Rather, it was made to allow the parties to negotiate the terms of the PSA.

SPPC earlier sought to end its deal with Meralco after the Energy Regulatory Commission (ERC) denied its proposal to hike power rates. The company argued that an increase was needed as it was suffering financial losses due to skyrocketing coal and fuel prices.

SPPC and Meralco jointly wanted the rate hike, saying that it would be the better alternative instead of sourcing power from the Wholesale Spot Electricity Market, which has higher and more volatile prices.

But the ERC was firm in saying that prices are fixed in the PSA to protect consumers from volatility. The commission went on to explain that while there are exceptions in the contract that would have allowed an increase, the circumstances in this particular case do not justify a hike.

The ERC’s stand, however, was effectively thumbed down by the CA.

“The continued implementation of the PSA where petitioner is compelled to bear the cost of energy supplied to the public on its own without any expectation of a reasonable return on its investment not only deprives the petitioner of its property, without due process of law, but also takes its private property for public use without just compensation,” the CA’s decision read.

SPPC was ordered to post a bond of P100 million “to answer for any and all damages” the respondents in the case may sustain relative to the court’s ruling.

The CA also specified that if the companies fail to reach an agreement within 60 days from the start of negotiations, SPPC would be entitled to terminate the PSA.

President Ferdinand Marcos Jr. earlier expressed his disappointment with the CA’s previous temporary restraining order that halted the PSA for 60 days, saying it could lead to higher power rates in Metro Manila. – Rappler.com

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.