San Miguel Corp. (SMC) on Tuesday reported securing Supreme Court affirmation allowing subsidiaries Sual Power Inc. and South Premiere Power Corp. (SPPC) to revoke their power supply agreements (PSAs) with the Manila Electric Co. (Meralco) due to change of circumstances.
In a disclosure to the Philippine Stock Exchange, SMC legal counsels Poblador Bautista and Reyes Law Offices received a copy of the resolution issued by the First Division of the SC dated 10 July 2024 denying with finality the Energy Regulatory Commission’s motion for reconsideration.
The SC also denied the request filed by the Office of the Solicitor General (OSG) for the issuance of a temporary restraining order and/or writ of preliminary injunction, citing lack of merit.
The SC decision effectively makes CICs valid grounds for terminating PSAs.
In October 2022, SMC subsidiaries Sual Power Inc., then known as San Miguel Energy Corp. (SMEC), cited changes in economic conditions while SPPC cited changes in legislation as grounds for terminating their respective PSAs.
Prior to this development, the power companies requested a temporary rate adjustment in their contracts as the cost of fuel in world markets rose to extraordinary heights compared to when the PSAs were first signed.
SMC asserted the temporary rate hike was needed to allow the company to remain sustainable amid the spike in fuel prices and that rate hike would only minimally increase electricity prices in Luzon whereas a termination of the PSAs will lead to higher rate increases as Meralco will have to find alternative sources that most likely will be costlier.
The ERC denied the requested temporary rate hike that compelled SMC to revoke the PSAs as a consequence.
Earlier, in 2019, Meralco conducted a competitive selection process won by SMEC for the supply and distributor of 330 megawatts worth of electricity at an all-in headline rate of P4.6314 per kilowatt hour (kWh). SPPC joined for 670 MW at an all-in headline rate of P4.6314 per kWh.
Both were baseload contracts effective 26 December 2019 for a term of ten years but subsequently terminated in October 2022.
Energy Regulatory Commission chief Monalisa Dimalanta on Tuesday said the regulator has yet to receive a copy of the SC decision.
Dimalanta also said the ERC will assess the practical outcome of the SC decision, particularly its impact on the monetary claims of the companies.
