SAN Miguel Corp. (SMC) secured a final decision from the Supreme Court (SC) allowing its subsidiaries, Sual Power Inc. and South Premiere Power Corp. (SPPC) to revoke power supply agreements (PSAs) with the Manila Electric Co. (Meralco) due to changes in circumstances (CICs).
In a disclosure to the Philippine Stock Exchange yesterday, SMC said it received on Monday through its legal counsel, Poblador Bautista and Reyes Law Offices, a copy of the resolution issued by the First Division of the SC dated July 10, 2024 which denied with finality the Energy Regulatory Commission’s (ERC) motion for reconsideration filed through the Office of the Solicitor General (OSG).
The High Tribunal also denied ERC’s request for the issuance of a temporary restraining order and/or writ of preliminary injunction due to lack of merit. The SC’s decision effectively makes CICs valid reasons to terminate PSAs.
In October 2022, SMC subsidiaries Sual Power Inc. then known as San Miguel Energy Corp. (SMEC) and SPPC, terminated PSAs with Meralco due to CICs.
SPPC had cited a change in law while SMEC noted a change in economic conditions as reasons for their filings.
Prior to the termination of the PSAs, the parties requested for a temporary rate hike in the contracts as the cost of fuel in the world market has jumped extraordinarily compared to prices when the PSAs were first signed.
SMC had said the temporary rate hike will ensure it would be able to continue supplying electricity amid the spike in fuel prices.
It added a temporary rate hike would only minimally increase electricity prices in Luzon but the termination of PSAs will lead to higher increase as Meralco will have to find alternative sources that will most likely be costlier, including the Wholesale Electricity Spot Market.
The ERC denied the requested temporary rate hikes and forced SMC and Meralco to revoke the PSAs instead.
In a competitive selection process conducted by Meralco in 2019, SMEC secured a deal to supply the distributor with 330 megawatts (MW) of electricity at all-in headline rate of P4.6314 per kilowatt hour (kWh) while SPPC joined for 670 MW at an all-in headline rate of P4.6314 per kWh.
Both contracts are for baseload supply of electricity or power that is needed 24×7 and were made effective Dec. 26, 2019 for a term of 10 years until they were terminated in October 2022.
Sought for comment, ERC chair Monalisa Dimalanta said the agency is yet to secure a copy of the SC decision.
Dimalanta said the ERC will study the implications of the SC decision especially if it will entail monetary claims for the companies.
