PSALM error strengthens SMC case over Ilijan contract

By Danessa O. Rivera (The Philippine Star) | Updated September 18, 2015 - 12:00am

MANILA, Philippines - The Power Sector Assets and Liabilities Management Corp. (PSALM) has inadvertently admitted it made an error in the interpretation of one of the provisions of the 1,200-megawatt Ilijan combined-cycle power plant independent power producer administrator (IPPA) contract with South Premiere Power Corp. (SPPC), which SMC Global Holdings Corp. claims reinforces its case for the illegal termination of the IPPA contract.

In a statement, SMC Global said PSALM president and CEO Lourdes Alzona recognized that the Ilijan Plant was under a power supply agreement (PSA) between SPPC and Manila Electric Co. (Meralco) at a rate approved by the Energy Regulatory Commission (ERC).

The PSALM official also said the state-run agency willing to supply Meralco’s requirement from the Ilijan power plant to ensure is power consumers are protected against price volatilities in the Wholesale Electricity Spot Market (WESM), the trading floor for electricity.

“SMC Global wholeheartedly approves of the points admitted by PSALM. SMC Global believes that Ilijan is baseload and its output must not be traded in the WESM to protect power consumers. That’s the reason why SMC Global cannot understand PSALM’s insistence on its erroneous interpretation of the Ilijan IPPA Contract provisions,” the company said.

SMC Global questioned why PSALM is pushing WESM rates to determine the obligations of the Ilijan IPPA instead of using the ERC-approved rates.

“That raises the point again of what is the agenda behind the termination of the Ilijan IPPA. Since the termination is obviously not for the protection of the power consumers, whose interest is PSALM advancing?” the power firm said.

This, the company reiterated, violates PSALM’s mandate under the Electric Power Industry Reform Act (EPIRA) which is the privatization of goverment-owned assets.

“Additionally and more importantly, the intention of PSALM to supply Meralco directly is a blatant violation of the privatization mandate of EPIRA and betrays a sinister purpose,” SMC Global said.

The company further noted this is not the first time PSALM has admitted that they erroneously interpreted provisions of the Ilijan IPPA contract.

“ ​The first was during the 2011 Malampaya shutdown when PSALM billed the Ilijan IPPA a liquids event price (LEP) of P30,710.47 per kwh,” it said.

The Ilijan IPPA administrator then disputed the billing, which PSALM acknowledged the LEP was erroneous and then billed the administrator the correct sum of P6.37 per kwh, an 80 percent reduction. source