POWER Sector Assets and Liabilities Management Corp. (PSALM) will continue billing San Miguel Corp. (SMC) based on their independent power producer administrator (IPPA) contract, until a court strikes down its billing method.
”We are not changing that until such time that there is a final decision by a court of law that says, ‘you are wrong;’ we will not change our position,” Irene Joy B. Garcia, PSALM president and chief executive officer, told reporters.
“It’s based on the contract, the formula provided for in the contract,” she said.
Ms. Garcia was responding to an announcement last month by SMC President and Chief Operating Officer Ramon S. Ang that he was willing to pay the P22.39 billion being billed by PSALM, but the company would in turn bill the agency around P162 billion.
Their dispute stemmed from the IPPA contract entered into by PSALM and SMC unit South Premier Power Corp. (SPPC) over the 1,200-megawatt Ilijan combined-cycle power plant in Batangas City.
Mr. Ang questioned PSALM’s position that the plant’s output should be sold to the spot market when power prices spike, then revert to the set price in a power supply agreement when prices fall. Their differing positions resulted in a dispute over the accumulated billings.
SPPC earlier filed a complaint against PSALM for willful breach of contract from a flawed interpretation of certain provisions of the IPPA agreement. The case also sought to stop PSALM from illegally terminating the Ilijan IPPA and treating SPPC as an administrator in default.
The court enjoined PSALM from proceeding with the termination of the Ilijan IPPA agreement with SPPC while the case is pending. SPPC said PSALM’s “willful breach of contract” was the result of a flawed interpretation of certain provisions related to its power generation payments under the agreement.
Ms. Garcia said that although there is a court injunction against the agency, what it is doing ahead of a final judgment is to go on “sending our billings in accordance with the legal position of PSALM in the case.”
“So when we bill them we send it in accordance with our interpretation because there is no judgment that’s final so even if they assert a certain interpretation of the formula, we continue to assert our own interpretation or our formula as stated in the agreement,” she said.
“What happens is when we bill them it’s based on our legal position, when they pay us it’s based difference there,” she added.
Over the weekend, Mr. Ang said in a statement: “Let me just make it clear once again that our contract is based on a binding concession agreement and a formula approved by the Energy Regulatory Commission. Ilijan is a base-load power plant. Its output should not be traded in the WESM (Wholesale Electricity Spot Market) to protect power consumers.”
“PSALM is asserting a formula that will expose the power users to WESM’s volatility,” he said as questioned whose interest the agency is protecting “because obviously they are not making reliable power affordable and accessible to consumers.”
“We will wait and let the court decide,” he added. — Victor V. Saulon