Let courts decide on PSALM debt issue, says SMC

MANILA, Philippines — San Miguel Corp. (SMC) believes the government should let the courts decide on its contract dispute with the Power Sector Assets and Liabilities Management Corp. (PSALM).

In a statement, SMC criticized the Department of Finance (DOF) and PSALM for releasing to the media its alleged unpaid debts to government through its power arm South Premiere Power Corp. (SPPC) on the 1,200-megawatt (MW) Ilijan power plant.

SMC urged the DOF and PSALM to give the country’s justice system a chance to decide the case first instead of resorting to trial by media in the hope of gaining public approval in an ongoing case concerning the Ilijan power plant.

“Let us not undermine the integrity of the court and return to basics. We choose to be on the side of law instead of presenting a good, yet misleading story. Let us stick to the facts of the case and let the court decide,” SMC president and COO Ramon Ang said.

SMC said the subject of contention has been pending with the Mandaluyong Regional Trial Court (RTC) since 2015. 

To expedite its resolution, SPPC filed a motion for production of documents by PSALM in order to have full disclosure of the facts.

However, instead of just proceeding with the discovery process by submitting the requested documents, PSALM filed a motion to hear other defenses unrelated to the merits of the case which the RTC and the Court of Appeals (CA) have both denied.

The RTC has also indefinitely enjoined PSALM’s termination of the IPPA agreement in favor of SPPC, while the case remains pending. Such injunction has been upheld both by the Court of Appeals and the Supreme Court.

“We are one with the DOF and PSALM in wanting to have closure to the case. However, premature closure by distorting the facts through the court of public opinion is only compromising the integrity of our justice system,” Ang said.

PSALM recently said that SMC owes the government P23.94 billion and that the amount is based on the company’s bid to become the Independent Power Producer Administrator (IPPA) of the Ilijan power plant.

It added that SMC should thus bear the “financial consequences” of its bid.

However, the main dispute between PSALM and SPPC is due to differing interpretations in computing generation payments provided for under the IPPA agreement, not in the amounts stated in SMC’s bid.

Generation payments are based on actual generation data and the determinants of revenues derived from the capacity of the Ilijan Power Plant, both of which could not be reasonably determined and, thus, would not be information included in the bid when the IPPA for the plant was bidded out.

As of end January, out of the P314.6 billion paid by SPPC to PSALM as IPPA of the Ilijan Power Plant, about P240.7 billion paid by SPPC is considered as generation payments.

SMC said PSALM failed to explain its reasons for claiming an additional amount of P23.94 billion in generation payments and related charges from SPPC.

Ang said the dispute stems from PSALM’s erroneous use of WESM prices in computing for generation payments beginning Jan 2013 to date. SPPC used the tariff rate approved by the Energy Regulatory Commission (ERC) for the Ilijan Power Plant, when appropriate, as required under the IPPA agreement in computing generation payments to PSALM.

This approach is also consistent with the baseload nature of the Ilijan Power Plant and the fact that its capacity is contracted in full to bilateral customers primarily Meralco which pays a tariff rate approved by the ERC.

SPPC has also not received any billing statement from PSALM claiming the alleged unpaid amount of P23.94 billion. Interestingly, PSALM released the figure to the media instead of informing affected party SPPC or SMC. Based on PSALM’s last billing statement to SPPC, it is claiming just P15.63 billion.