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San Miguel power unit disputes gov’t claim of unpaid fees

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SOUTH PREMIERE Power Corp. (SPPC) said it had paid the government P289.1 billion since 2010 in various fees as administrator of the Ilijan power plant in Batangas, as it disputed the P19.75 billion in supposed unpaid dues being claimed by the state energy privatization agency.

In a statement over the weekend, the unit of SMC Global Power Holdings Corp. said it honors and religiously pays its contractual obligations to the Power Sector Assets and Liabilities Management Corp. (PSALM) under the independent power producer administration (IPPA) agreement for the 1,200 megawatt (MW) facility.

“It is unfortunate that PSALM has to resort again to misinformation while the case is pending in court. While it is inappropriate for us to comment on the issue, we take this matter seriously and we cannot allow damaging statements like this to hurt our reputation and our stakeholders,” SPPC President Ramon S. Ang said.

The issue relates to a complaint earlier filed by SPPC against PSALM for willful breach of contract because of flawed interpretation of certain provisions on its power generation payments under the Ilijan IPPA agreement.

IPPAs are qualified private entities that manage the output from energy conversion and power purchase agreements that the National Power Corp. (Napocor) entered into with independent power producers.

They are appointed through public auctions conducted by PSALM.




SPPC said PSALM’s “questionable” interpretation resulted in the alleged shortfall in its payments. The company said its records show that the P289.1 billion or $6.19 billion paid as of end April 2019 to PSALM consists of P222.4 billion in energy fees and P66.66 billion in capacity fees.

It said by the time the agreement expires in 2022, it will have paid PSALM a total of P390.6 billion representing P293.01 billion in energy fees and P97.6 billion in capacity fees.

It added that the amount it paid for capacity fees alone, which is equivalent to about $2 billion, is enough to pay for the 20-year-old power plant. It said a brand new plant with the same capacity could be built for so much less.

SPPC also reimburses PSALM regularly for fuel and variable operating and maintenance costs in the form of energy fees, the company added.

Hence, SPPC said, it is paying PSALM more than what it is paying the IPP counterparty for the Ilijan power plant.

PSALM is, in fact, net cash positive from its administration agreement with SPPC, it said, adding that as of end-April, the state agency gained P34.75 billion from its administration agreement with SPPC.

SPPC also responded to PSALM’s claims that the company should have sold its power generation to the Wholesale Electricity Spot Market (WESM) instead of distribution utility Manila Electric Co. (Meralco) as the arrangement would have optimized revenues from the high market prices in November and December 2013.

It said PSALM’s view is not only in hindsight but also “very short sighted.” It said prices in those months in 2013 at P15.56 per kilowatt-hour (/kWh) “was a fluke” and was in fact declared by Energy Regulatory Commission (ERC) null and void in its order of March 2014.

SPPC said WESM prices are volatile since they are dictated by supply and demand. It said that, at a time when supply exceeds demand, prices hover at about P2-2.50/kWh, which could have meant huge losses for PSALM and SPPC.

“It is not even enough to pay for fuel costs,” it said.

It cited ERC’s Dec. 17, 2012 decision in Case No. 2012-034RC on the application for approval of the Meralco-SPPC power supply agreement (PSA) in relation to the Ilijan power plant, which states among others that Ilijan is a baseload plant, hence, a bilateral contract provides price stability to protect consumers.

The decision also states that proposed rates are lower than what SPPC is entitled to and lower than Napocor rates, thus beneficial to consumers.

It also says that the rates allow SPPC only recovery of its monthly payments to PSALM plus an equity return of 16.44% post tax, in accordance with ERC’s doctrine on return of equity of power generators.

SPPC said on a monthly basis, it pays PSALM the amounts required by the administration agreement as detailed, authorized and mandated by the ERC decision.

The case filed by SPPC also sought to stop PSALM from illegally terminating SPPC’s Ilijan IPPA and treating the latter as an administrator in default.

The company said that, on Sept. 15, 2016, the court issued an order granting a preliminary injunction that enjoins PSALM from proceeding with the termination of the IPPA agreement with SPPC while the main case is pending. — Victor V. Saulon

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