Muddling the issue

There are matters that are better left for the judicial branch of our government to decide.

One of this is the issue of whether or not San Miguel Corp.-owned South Premiere Power Corp. (SPPC) still owes the Power Sector Assets and Liabilities Management Corp. (PSALM) in connection with the latter’s administration of the 1,200-megawattt Ilijan combined-cycle power plant and if yes, how much.

PSALM is a government-owned and a controlled corporation (GOCC) created under the Electric Power Industry Reform Act, or EPIRA, to privatize the assets of the National Power Corporation with the aim of liquidating Napocor’s financial obligations.

Among the assets sold by PSALM was the Ilijan power plant in Batangas with a contracted capacity of 1,200 megawatts to SPCC at a price of $870 million.

Due to differences in interpreting the basis for generation payments, SPPC and PSALM began discussions in 2012 to come up with a proper computation. But despite ongoing discussions, PSALM in 2015 unilaterally terminated the independent power producer administration (IPPA) agreement deal with SPPC over alleged non-payment of so-called generation payments under the agreement.

But according to SMC, the  said non-payment, initially pegged at P19 billion by PSALM, is based on a flawed computation by the GOCC.

SMC filed a case with the Mandaluyong Regional Trial Court in 2015 for willful breach of contract. The company was also able to secure a preliminary injunction preventing PSALM from terminating the IPPA while the court is still hearing the main case.

PSALM questioned the preliminary injunction with the Court of Appeals, but lost. It appealed to the Supreme Court,  but was again denied through a petition for certiorari only to be denied by the CA. PSALM appealed the CA decision to the Supreme Court, but the latter upheld the appellate court’s ruling when it said that PSALM failed to sufficiently show that the CA committed any reversible error in its decision. The SC’s ruling became final and executory on Aug. 5, 2019.

Meanwhile, PSALM questioned in 2018 the Mandaluyong trial court’s jurisdiction over the matter, but the lower court ruled against it. PSALM went to the CA which dismissed its petition in August of last year. PSALM has filed a motion for reconsideration.

But what is disconcerting is the fact that some members of the House of Representatives are using the issue for their own personal aggrandizement and for obviously political reasons as part of an ongoing power battle in the Congress.

Leyte Rep. Vicente Veloso for instance questioned the RTC’s jurisdiction over the case, saying power-related issues should be handled by the Energy Regulatory Commission (ERC) and not the lower court.

But SPPC, in a statement, has pointed out that the EPIRA’s provision on the original and exclusive quasi-judicial jurisdiction of the ERC is clarified by the law’s implementing rules and regulations which provide that the ERC has original and exclusive quasi-judicial jurisdiction over disputes between or among energy sector participants only if such disputes relate to the ERC’s powers, functions and responsibilities provided for in the EPIRA and the EPIRA IRR.

According to the company, the issue between SPPC and PSALM is outside of the powers, function and responsibilities of the ERC, especially since the latter had no participation in the privatization of the IPPA between the owner of the Ilijan Power Plant and the Napocor, or in the IPPA agreement between SPPC and PSALM.

In a statement, SPPC emphasized that PSALM, ERC, and the legislature are bound by the clarification of the ERC’s jurisdiction over disputes between electricity industry players because the EPIRA IRR were promulgated by the Department of Energy after consultation with PSALM and the ERC, and approved by Congress itself through its joint congressional power commission.

SPPC noted that PSALM was aware of the ERC’s quasi-judicial jurisdiction over disputes between electricity industry players because it even required in the IPPA agreement that “either party may bring a legal action or proceeding to resolve any such dispute or difference arising out of this agreement against the other party in the courts of proper jurisdiction of the Republic of the Philippines.” 

One of the issues before the Mandaluyong RTC is whether SPPC indeed owes PSALM.

SPPC stressed that it has not received monthly billing statements from PSALM, contrary to the latter’s claim that indicate an alleged deficiency claim which PSALM said has now ballooned to P23.94 billion as of December 2019. According to SPPC, it only learned of the alleged P23.94 billion deficiency from news articles quoting PSALM.

SPPC has also said that it is updated in its payments to PSALM based on monthly billing statements the government entity sends, using SPPC’s legal position on, and computation of,  generation payments.

To date, the company has already paid P314.6 billion to PSALM as of January 2020 for its administration of the Ilijan capacity, consisting of P73.9 billion in regular, fixed monthly payments and P240.7 billion in generation charges.

SPPC and PSALM are at loggerheads over how said generation payments should be computed.

While PSALM is computing generation payments due from SPPC based on prevailing Wholesale Electricity Spot Market (WESM) prices, particularly from November to December 2013 when there was a temporary spike in prices, that would have required SPPC to sell the Ilijan capacity to the spot market which is contrary to the nature of a baseload plant and which is illogical considering that the power plant has been and continues to be fully contracted to bilateral power customers, primarily Meralco.

SPPC explained that selling its capacity to WESM would have put the company in violation of their power supply contract approved by ERC and which was designed specifically to protect consumers from volatile and higher electricity prices in the WESM.

What many do not realize is that San Miguel could have built a brand new power plant with the same capacity at an amount far less that the billions in dollars in capacity fees that it has paid to PSALM so far for the ageing Ilijan plant. A brand new and modern facility would cost only P40 billion compared to the P97.6 billion that has and will be paid by SPPC until the end of its contract.

Aside from the legality of PSALM’s claim against SPPC, there is still, of course, this nagging issue of whether or not PSALM is being mismanaged, why there is a need for PSALM to borrow money to service debts when it has so much money raised from privatizing Napocor’s assets, from collecting fees from IPP administrators, from managing the universal charge for missionary electrification which is imposed on electricity consumers, among others.

These congressmen should not allow their personal agenda to muddle the real issues here.

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