CA issues injunction on SMC firm’s PSA with Meralco for Ilijan plant

The 13th division of the Court of Appeals (CA) has granted the petition for writ of preliminary injunction (WPI) lodged by South Premiere Power Corporation (SPPC), a subsidiary of SMC Global Power Holdings of the San Miguel group, that will continually suspend the implementation of its power supply agreement (PSA) with Manila Electric Company (Meralco) on the supply of 670-megawatt capacity from the SMC firm’s Ilijan gas-fired power plant.

In a decision penned by Associate Justice Mary Charlene V. Hernandez-Azura, it was primarily stipulated that “petitioner’s (SPPC) application for the issuance of a writ of preliminary injunction is granted.”

The appellate court qualified though that “the grant of the WPI suspends the continued implementation of the PSA but does terminate the same.”

Instead, the CA had directed the parties (Meralco and SPPC) “to enter into good faith negotiations” that will then amend the terms of the 10-year PSA based on ‘change in circumstances’ or CIC tenet as specified under Section 11.4 (d) of their contract.

The court also ordered SPPC to post a bond of P100 million “to answer for any and all damages which respondents may suffer or sustain” relative to the issuance of the WPI.

The court verdict was promulgated on January 25 this year, coinciding with the lapse of the 60-day temporary restraining order (TRO) that was earlier granted to SPPC relating to its rate hike case that was denied by the Energy Regulatory Commission (ERC) last year.

When asked on the next steps to be taken by the utility firm, Meralco First Vice President and Head of Regulatory Affairs Jose Ronald Valles indicated that such matter was still being discussed with their legal team.

In rendering injunctive relief for SPPC, the court opined that the petitioner “has clear and unmistakable Constitutional rights: not to be deprived of liberty and property without due process of law; and against the taking of its private property for public use without just compensation.”

The CA expounded that since the issuance of the ERC decision, the SMC subsidiary-firm was able to exhibit that “the continued implementation of the PSA and its continued power supply to Meralco has caused it to suffer millions in losses everyday.”

The penultimate court further noted that SPPC “was being forced to sell on a negative margin, which produces an untenable situation because the more petitioner sells, its business losses become greater.”

It was primarily cited that from January to May 2022 billing periods, “petitioner has already incurred staggering losses of more than P1.3 billion,” qualifying that such losses had already been incurred and does not include yet any future foregone revenues that the company would be suffering from if its supply contract with Meralco will continue to be enforced.

The judicial body added “the continued implementation of the PSA where petitioner is compelled to bear the cost of energy supplied to the public on its own without any expectation of a reasonable return on its investments not only deprives the petitioner of its property without due process of law but also takes its private property for public use without just compensation.”

On the part of the ERC ruling which upheld “the preservation of the PSA”, the CA declared that SPPC was “deprived of notice and an opportunity to be heard on such issue when the ERC categorically imposed the continued implementation of the PSA.”

The Court thus stated “the issuance of the WPI is precisely the remedy available to petitioner in order to prevent the continued implementation of the PSA.”

The other contract of SMC with Meralco for the delivery of 330MW capacity from the Sual coal-fired power plant was earlier served with a TRO by the 16th vision of the appellate court. ###