CA junks ERC ruling denying Meralco, SMC rate hike
MANILA, Philippines — The Court of Appeals (CA) has nullified the decision of the Energy Regulatory Commission (ERC) to deny the rate hike petitions jointly filed by power distributor Manila Electric Co. (Meralco) and units of conglomerate San Miguel Corp. (SMC) because of losses.
In a June 27 decision, the CA 13th Division ruled that the majority of the ERC acted “with grave abuse of discretion amounting to lack or excess of jurisdiction” in issuing Case Nos. 2019-081 and 2019-083, which junked the petitions of Meralco, SMC subsidiary South Premiere Power Corp. (SPPC), and San Miguel Energy Corp. (SMEC) for a rate hike of P0.30 per kilowatt-hour (kWh).
Meralco head of regulatory management Jose Ronald Valles said Wednesday they would begin negotiations with suppliers for an emergency power supply agreement (PSA) to replace any capacity they “might lose if SMEC terminates its PSA with Meralco as a result of the CA decision.”
Valles also noted that there were some matters in the decision “that we feel need to be clarified,” and that Meralco was consulting with its lawyers on available legal remedies, including an appeal to the Supreme Court.
“We note that the Court of Appeals has upheld the position taken by SPPC/SMEC and Meralco during the hearing at the ERC that the grant of the fuel price adjustment is the least cost option for our customers rather than buying replacement power from [the spot market] or other suppliers,” Valles said.
To recall, SPPC and SMEC entered into a 10-year agreement with Meralco in 2019 to supply 1,000 megawatts (MW) of capacity from the Ilijan gas-fired power plant and the Sual coal-fired power plant.
The headline rate of Meralco’s PSA with SMEC was at P4.6314 per kWh, while its deal with SPPC pegged the rate at P4.2455 per kWh. In 2019, spot market prices averaged P8.47 per kWh.
But in October 2022, both SPPC and SMEC issued termination notices to Meralco to suspend the PSA, citing unexpected and unprecedented “change in circumstance,” such as the surge in fuel costs.
The companies raised the case to the CA after the ERC denied both the rate hike proposal and the termination.
The CA, however, denied SMEC’s prayer for a temporary restraining order in January this year, thus obligating the company to continue supplying 330 MW to Meralco.
In the same month, the appellate court issued a writ of preliminary injunction that continually suspended SPPC’s PSA with Meralco that “has caused it to suffer millions in losses every day.”
ERC, through the Office of the Solicitor General (OSG), then filed with the Supreme Court a petition for certiorari to nullify the CA decision.
The appellate court argued, however, that the ERC should have brought the case to an arbitral tribunal, “as provided in the PSAs,” and that in invalidating the petitions of Meralco, SPPC and SMEC, the regulator “did so with grave abuse of discretion.”
Sought for comment, ERC Chair Monalisa Dimalanta said they had yet to receive a copy of the CA decision and “get the advice of the OSG” on whether it would file a motion for reconsideration.
At the same time, the CA made permanent the writ of preliminary injunction issued in favor of SPPC that suspended its PSA with Meralco.
In a statement, Power for People Coalition convenor Gerry Arances slammed the CA decision that “releases SMC from any consequences of breaking a contract simply because it is not earning enough from a commitment it has made voluntarily.”
“We hope that the court will reevaluate and we will file a motion for reconsideration to give the justices another chance to live up to their name,” he said.