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San Miguel’s claim speculative — PSALM

Power Sector Assets and Liabilities Management Corp. described as “purely speculative” the claim of San Miguel Corp. that power rates will go up with the  termination of the independent power producer administrator contract for the 1,200-megawatt Ilijan combined-cycle power plant.

“The assumption on increase in the electricity price is just a play on public opinion and is very speculative, given that prices at the WESM [wholesale electricity spot market] are driven by market forces and competition. Likewise, government has in place a price cap and a secondary price cap at WESM to address unnecessary spikes and protect power consumers,” PSALM president and chief executive Lourdes Alzona said.

Alzona said almost all output of the Ilijan plant was under a power supply agreement between South Premiere Power Corp., a unit of SMC Global Power Holdings Corp. and distributor Manila Electric Co. at a rate approved by the Energy Regulatory Commission.

“With the Ilijan IPPA contract termination and consistent with its mandate to manage its remaining assets, PSALM is willing to supply Meralco’s requirements to ensure that power consumers are protected against price volatilities in the WESM, subject to necessary approvals since PSALM is not a party to the PSA,” Alzona said.

Alzona was reacting to the statement of San Miguel that the Ilijan IPPA agreement termination was illegal.  She said PSALM had faithfully adhered to the provisions of the agreement, which eventually led to the contract termination due to failure of South Premiere to settle its unpaid obligations for the period Dec. 26, 2012 to April 25, 2015.

PSALM said it sent letters to South Premiere as early as Sept. 10, 2013 and Oct. 20, 2014, demanding that the company immediately settle its unpaid obligations. PSALM said these  were never settled and remained uncontested by South Premiere.

She said as PSALM had strictly followed the computations based on the IPPA agreement and its rightful claims were valid and not erroneous.

“On the contrary, it is SPPC’s computation of payments that is erroneous, as SPPC unilaterally and erroneously applied prices which were inconsistent with the Ilijan IPPA AA,” Alzona said.

Alzona said South Premiere’s underpayment of its total unpaid obligations was even the subject of an independent audit conducted by the Commission on Audit, as contained in COA’s Audit Observation Memorandum dated March 23, 2015.

PSALM  said it was compelled to avail of the relief provided under the Ilijan IPPA agreement with South Premiere on Sept.  4 for failure to pay the outstanding generation payments for the period Dec. 26, 2012 to April 25, 2015.

PSALM said it issued the notice of termination to South Premiere to stop the government from incurring unnecessary losses as a result of South Premiere’s non-payment of its obligations amounting to P6.46 billion, which formed part of the privatization proceeds to be utilized to liquidate the financial obligations of National Power Corp., pursuant to the Electric Power Industry Reform Act.

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