Could this be a case of “better to laugh with the sinners than weep with the saints?” Too bad for consumers—no laughter here, only swelling bills and bitter tears!
Back in November 2022, the Energy Regulatory Commission (ERC) slammed the door on the ₱5.2-billion rate hike plea of SMC Global Power Holdings Corp. of the San Miguel Group, which was legally grounded on a “change of circumstance” (CIC) clause in its power supply agreements (PSAs)—blocking what could just have been a ₱0.30 per kilowatt-hour (kWh) increase within six months. Now, consumers face an even harsher reality: was rejection really the lesser evil?
Fast forward to 2025: the Supreme Court (SC) has decided, and it handed SMC Global Power the green light to claw back costs from its PSA adjustments—and based on a new rate petition lodged with the regulatory body that already ballooned to a jaw-dropping ₱34-billion bombshell poised to hit consumers where it hurts the most.
Citing Article 11.3 of their PSA, a 2022 joint regulatory filing by SMC and its off-taker Manila Electric Co. (Meralco) sought a six-month rate hike from the ERC, citing major factors such as Malampaya gas restriction, war-driven fuel shocks, and Indonesia’s coal ban—events that sent coal prices soaring from $60 to $440 per ton and qualified such as “change in circumstance” under their ERC-approved supply contracts.
The PSAs define CIC as any post-signing legal shift, fundamentally “any law coming into effect after the signing of (the) agreement, including the adoption or enactment, or any change or repeal with respect to the imposition of taxes, duties, levies, fees, charges or similar impositions, and the right to remit or convert currencies...”
The covered PSAs were those with South Premiere Power Corp. (SPPC) for the 670-megawatt (MW) power capacity drawn from Ilijan gas plant and with San Miguel Energy Corp. (SMEC) for the 330-MW supply from Sual coal-fired power plant, which were then delivered to Meralco.
The ERC’s majority bloc, led by Chairperson Monalisa Dimalanta, ruled that surging fuel prices—even if they bled businesses dry—as well as state-declared gas restrictions didn’t qualify as a “change in circumstance” under fixed-rate PSAs, and that somehow sealed the fate of the rejected rate hike case.
SMC and Meralco, however, argued then that a price hike was the least costly burden for consumers—a claim reinforced by the ERC’s own Regulatory Operations Service (ROS) calculations.
Backing their application, SMC and Meralco leaned on the ERC’s ROS data, which aligned with Meralco’s own figures—warning that rejecting the rate hike could spike consumer costs from ₱5.2 billion to ₱12.6 billion and could even swell to as high as ₱25.8 billion.
Their rate hike filing similarly highlighted that the scale of losses incurred by power supplier SMC had already been breaching the thresholds prescribed in the contract—hence, such could be invoked as a ground for termination of the PSA.
Circling back to the SC decision: how deep does the pain cut for consumers now? A crushing ₱34 billion!
Consumer welfare: A battle lost before it began?
In the ERC ruling, the majority commissioners had disputed SMC-Meralco’s assumption, as they reckoned that: “while it may appear that the parties have absolute option to terminate the PSA by mutual agreement, the Commission reminds applicants that in contrast to ordinary commercial contracts, PSAs are contracts imbued with public interest,” stressing that the long-standing principle is: “public welfare is superior to private right.”
But since that rate hike rejection, Filipino consumers already endured a string of financial blows—PSA terminations, the cost burden on pricier capacity replacements—really heavy loads that they never chose to carry.
And the ERC decision further triggered shockwaves when many of the “fixed-price contracts” in the retail competition and open access (RCOA) space crumbled, as the retail electricity suppliers (RES) similarly invoked cost recoveries amid soaring fuel prices; taking their cue from events that unfolded after the regulatory decision on the SMC-Meralco rate hike—and that somehow shattered consumer confidence also in what was supposed to be a competitive market.
In her interview with the media, the ERC Chair indicated that the SC-sanctioned rate hike will be reviewed to determine the reasonableness of the SMC petition, emphasizing, “I’m sure they do not expect us to just approve a blank check without supporting documents.”
She clarified that while the Court of Appeals initially capped cost recovery at ₱5 billion, the ERC’s failed motion paved the way for SMC to push a staggering ₱29-billion adjustment after a Supreme Court win—culminating in a ₱34-billion rate hike bid now under the ERC’s microscope.
At this point, one certainty remains—no matter how the numbers shake out, ratepayers will shoulder the weight of the looming rate hike.
Consumers have been the punching bag long enough—let’s hope that regulators finally graduate from the “school of hard knocks” and really start giving consumers the top billing instead of high electric bills.
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