MELANDREW T. VELASCO: SMC optimism amid challenging times in the power sector

A report quoting Energy Secretary Raphael Lotilla that the country’s power supply situation in 2023 is likely to be difficult reminds me of former President Fidel V. Ramos who said “Let us make sure the lights never go off in the Philippines again!”

For it was during the latter part of President Cory Aquino’s administration and the early years of FVR’s administration when the country suffered intense power outages and I pray we will not go back to those dark and bleak months in our country’s history.  To FVR’s credit however, the problem was addressed enabling the government to pursue its economic development goals.

There is no argument that reliable and affordable energy is needed to spur the growth of industries, improve transportation, modernize agriculture, and provide a comfortable living condition to people.

But our energy sources still remain to be fully harnessed and much still has to be done to improve our energy infrastructure.

Meralco, the largest private sector electric distribution utility company in the country, accounts for 55% of the country’s electricity output. Its coverage includes 36 cities and 75 municipalities. The electricity it distributes is provided by independent power producers.

It has power supply agreements with San Miguel Corporation Global Power Holdings through South Premiere Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC), independent power producers (IPP) of the 1,200-megawatt (MW) Ilijan power plant and the 1,200 MW Sual power plant.

The existing agreements are regulated by the Energy Regulatory Commission (ERC), a quasi-judicial regulatory body created pursuant to the Republic Act No. 9136, the EPIRA Law. It is “tasked to promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the electricity industry.”

ERC is now headed by lawyer Monalisa Dimalanta who earlier served as chairperson of the National Renewable Energy Board (NREB) from 2019 to 2021. An alumna of the University of the Philippines, Dimalanta was former chief legal counsel and compliance officer of the Aboitiz Power Corporation, one of the leading suppliers in the Philippines.

As consumers of electricity, we have witnessed how our electric bills vary. It is difficult to peg the price of electricity because it is affected by several factors, among these the cost of generation. An increase in the cost of generation in turn necessitates a hike in the rate charged by independent power producers for their business to remain viable.

To date, SMC has incurred losses in its operation of the two power plants in Batangas and Pangasinan. A rate adjustment would help SMC recover its losses over time. This would be a win-win solution for all stakeholders. Terminating the power supply agreements and entering into a new one with a different player could be more costly.

A petition for a rate adjustment filed by SMC’s subsidiaries with the ERC however was rejected. The regulatory body stressed that “the fixed price nature of the subject PSA is meant precisely to protect consumers from market volatilities, such risks being assumed by the supplier.” But to discerning groups and individuals, that’s not what it seems to be since business or power politics seems to be raring its ugly head in the power sector that might lead us again to the dark ages.

It is lamentable that the ERC “chose to look the other way” when it ruled against the petition for a temporary relief to recover part of the P15 billion in losses incurred by the units of SMC Global Power Holdings Corp. (SMCGP), the power arm of conglomerate San Miguel Corp. (SMC).

In a statement, SMCGP was made aware of the looming power rate hikes. It was also duly informed of how it can ensure that the public gets the lowest possible rate while energy players continue to supply power viably amid rising geopolitical risks beyond anybody’s control.

As if on cue, on November 24, the Court of Appeals issued a TRO suspending the implementation of the power supply agreement of the SMC subsidiary SPPC with Meralco.

To compound the matter on the looming energy crisis, President Ferdinand R. Marcos Jr. said he was hoping that the Court of Appeals (CA) would reconsider the “unfortunate” ruling of its 14th Division regarding a 60-day temporary restraining order (TRO) in favor of South Premier Power Corporation (SPPC). The TRO, in effect, suspended the implementation of SPPC’s power supply agreement (PSA) with Manila Electric Company (Meralco).

Consumer advocacy group Infrawatch commented, however, that the President “should allow full judicial proceedings to take its course,” and that “his views may ably be represented through ERC lawyers and the Solicitor General.”

Despite the present challenges and all these concerns, SMC has remained steadfast to help the country in its economic recovery. Undoubtedly, since its establishment over a century ago, it has embarked on many projects that benefitted the Filipinos even as its leaders grew the business from a beer manufacturing company to become one of the country’s most diversified conglomerates.

Businesses have always been agents of change and SMC is no exception. It has always been a partner of government in the pursuit of its goals, both for economic and social development.

At the high of the pandemic, SMC under the leadership of its President and CEO, Mr. Ramon S. Ang, did not hesitate to give its all-out support to the government from providing relief goods to the most affected, personnel to man vaccination sites, to donating vaccines to augment dwindling supplies and even paying taxes in advance to ensure the treasury is not depleted.

It has also invested in big-ticket infrastructure projects like the Bulacan Bulk Water Supply Project, New Manila International Airport, Skyway Stage 3, and the Pasig River Expressway to name a few. In pursuing these projects, SMC conducted studies to ensure protection of the environment as the conglomerate is a leading advocate for sustainable development.

SMC undertook and successfully completed the rehabilitation of the Tullahan River and is on track with the rehabilitation of the Pasig River. Its reforestation program is also being pursued vigorously with SMC Global Power Holdings accounting for 3.7 million trees out of the total 3.8 million trees planted by the conglomerate.

Reflecting on what SMC has contributed to nation-building and how it has shown its malasakit to the Filipinos, the recognition bestowed upon RSA by Tatler as one of Asia’s Most Influential recently is merited.

For two consecutive years, RSA is in the roster of accomplished individuals recognized by Tatler as one of Asia’s Most Influential PH.

The list, according to website, brings together the region’s most innovative change makers, industry titans and powerful individuals who are shaping the region through positive impact.  Further, it defines “influential people” as “those who push for positive change and have relevance in their countries and beyond borders”.

It is a fitting tribute to RSA who remains unbowed and confident that the government and the Filipino people will go beyond these challenging times.