Court issues TRO on ERC order vs SMC-Meralco deal

MANILA, Philippines — The Court of Appeals (CA) has issued a temporary restraining order (TRO) in favor of San Miguel Corp. subsidiary South Premier Power Corp. (SPPC), suspending the implementation of its power supply agreement (PSA) with the Manila Eelctric Co.

SPPC secured a favorable ruling from the CA 14th Division in a petition filed against the Energy Regulatory Commission (ERC)’s decision last September denying its joint motion with Meralco for price adjustment.

“In view of the circumstances and the interest of the general public, this court grants the TRO and hereby suspends the implementation of the PSA. The TRO shall be effective for a period of 60 days from service on respondents,” the CA said.

SPPC sought the issuance of a TRO and a writ of preliminary injunction to enjoin ERC from executing its Sept. 29 decision.

However, the CA said it is constrained to resolve only the TRO as the respondents have yet to file a comment.

The CA said that  the SPPC, in its petition for certiorari, claimed that unless the implementation of the ERC order is immediately restrained, it would be forced to continue to supply energy to Meralco under the PSA at a loss, “resulting in great and irreparable injury before its application  for a writ of preliminary injunction can be hear on notice.”

“This court emphasized with petitioner’s serious losses which are capable to render it insolvent due to unforeseeable cause,” the CA said.

SPPC claimed the ERC acted with grave abuse of discretion in denying its rate increase petition and when it interpreted the rights of the company and Meralco under the PSA.

The CA said the issuance of the TRO is conditioned upon posting of SPPC of a P50 million bond “which will answer for any and all damages which respondents may suffer or sustain by reason of the issuance of the same should this Court finally decide that petitioner is not entitled thereto, and shall remain in full force and effect until the petition for certiorari is finally decided.”

ERC chairperson and CEO Monalisa Dimalanta, in a statement, expressed grave concern on the instantaneous effect of the temporary suspension in the implementation of the PSA based on the TRO.

She said this would consequently expose approximately 7.5 million registered Meralco consumers in the National Capital Region and other areas in Region III and IV to higher electricity prices without preparation usually observed in case of PSA termination.

“The fixed price PSA of Meralco with SPPC covers 670 megawatts (MW) of supply. This, along with the other fixed price PSAs, have been shielding Meralco consumers for the past several months from the volatility of prices from WESM and automatic fuel pass-through PSAs,” Dimalanta said.

“If these PSAs are immediately suspended, this brings us precisely to the situation which we at the ERC have sought to avoid with our ruling that required the proper observance of the terms of the PSA, including the contractually-agreed process of termination,” she said.

The ERC, in an order promulgated on Sept. 29,  denied a joint rate hike petition of SMC power units and Meralco for a temporary adjustment in the prices of their PSAs signed in 2019 to recover fuel costs amid the unprecedented spike in fuel prices.

The price adjustments was supposed to serve as temporary relief covering a combined P5.2-billion losses incurred by SPPC and San Miguel Energy Corp. from January to May   as a result of soaring fuel prices.

The ERC said the plea for price increase was denied since the regulatory body ruled that the agreed price in the PSA is fixed in nature, and the grounds for increase cited by SPPC and Meralco were not among the exceptions that would allow for price adjustment.

The ERC said the TRO relied solely on the statements of SPPC in its petition, citing the “simulations made by Meralco which were independently corroborated by ROS, (as) reasonably true and valid.”

It said such misinterpretation of the simulations of ERC’s Regulatory Operations Service   will be clarified when its submits its comments to the Court.

“ERC is confident that the 14th Division of the Court of Appeals, consistent with existing jurisprudence, will accord great respect, if not finality, to the regulator’s factual findings because of its special expertise over the energy sector,” it said.

Meanwhile, Meralco first vice president and head of regulatory management Jose Ronald Valles said the company is reviewing the CA resolution in consultation with its counsel to determine the next steps.

“We have also written the Department of Energy to follow up on our previous letter requesting for CSP exemption of certain emergency PSAs that are ready to be implemented to shield our customers against volatile and potentially higher WESM prices,” Valles said.

The Power for People Coalition (P4P) condemned the TRO issued by the CA, calling it “ illogical and anti-consumer.”

“The TRO is absurd and rash. It suspended the PSA between SMC and Meralco, which governs how SMC can supply Meralco with electricity and how much SMC can charge,”  P4P convenor Gerry Arances said.

“Now that it is gone, how should Meralco act to procure electricity? How much can they charge consumers? How should Meralco react given that the PSA suspension is temporary? This is a desperate move from SMC, and with the CA’s approval, consumers are left to foot the bill for SMC’s business decisions to use volatile coal and gas in its power contracts,” Arances said.