SPPC, SMEC vs. ERC: A tale of two Court of Appeals decision

Before January ended, the Court of Appeals (CA) decided on two cases involving San Miguel Corp.’s subsidiary SMC Global Power Holdings’ South Premiere Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC), and the Energy Regulatory Commission (ERC), almost at the same time.

The CA’s recent resolution against the ERC ruling is a classic tale of two different decisions emanating from a single issue: the petition for a power rate adjustment by SPPC and SMEC. On Jan. 13, the CA’s 16th Division denied the petition for a temporary restraining order (TRO) filed by SMEC, saying in its resolution that the SMEC’s motion for price adjustment preserves the status quo, referring to the contract price in the power supply agreement (PSA) between the company and electricity distributor Manila Electric Co. (Meralco). The court said that granting SMEC a TRO will “not serve its purpose, since it will have the effect not of maintaining the contract price, but of setting aside the assailed order itself, thereby rendering the main case, the petition for certiorari, moot.”

According to the CA resolution, if the petition were granted, “the writ of injunction will give SMEC the unrestricted power to terminate, at its own will, the power supply agreement to the detriment of public consumers.” The CA also stated that a TRO cannot be granted since it will entail an extensive determination of the merits of the SMEC case. Despite its denial of the TRO, the court granted SMEC’s motion for case consolidation with another case of similar facts filed by the SPPC pending before the CA’s 13th Division.

The second CA decision came 12 days later. On Jan. 25, the CA upheld the petition for writ of preliminary injunction (WPI) by SPPC, which continuously suspends the implementation of SPPC’s power supply agreement with Meralco. But the appellate court was quick to qualify that the grant of WPI merely suspends the continued implementation of the PSA and does not terminate it. Hence, the court directed Meralco and SPPC “to enter into good faith negotiations” that will amend the terms of its 10-year PSA based on change in circumstances provisions under their current contract.

The court also ordered SPPC to post a bond of P100 million to compensate for any and all damages that the respondent may suffer or sustain as a result of the decision. At first glance, the decision on SMEC’s petition seems to offer relief to the 7.1 million Meralco subscribers as it orders the continuation of SMEC’s obligation, preventing another power rate increase. We at Kuryente.org agree with the CA’s argument that both SPPC’s and SMEC’s prayers for TRO will provide them with “unrestricted power to terminate” the power supply agreement “to the detriment of the consuming public.” But the argument should have applied as well to the SPPC petition. The TRO victory of SPPC was a dangerous precedent that sets aside fixed price contracts and gives it enormous corporate power to easily rescind any obligation and contract, thus circumventing the rules on proper contract cancellations.

The most critical argument that needs to be proved is SPPC’s issue of business losses to justify a power rate increase. The facts are contrary to such claim based on the 2022 BusinessWorld Top 1,000 Corporations, where it is stated that SMEC and SPPC both have a net income of P5.34 billion and P4.5 billion, respectively. These figures do not fit in the narrative of business losses. With the recent decision of the CA on the SPPC case against the ERC, it seems that the SMC power corporation once again won its day in the court, although temporarily as the injunction is not permanent. The decision only sided with its argument of business losses in the billions, and of being deprived of due process by the ERC. The legal battle is not yet over, unless a permanent injunction or final decision is arrived at.

Roland Vibal,

national coordinator,

Kuryente.org