SPPC’s payables to PSALM relative to the 1200MW Ilijan Power Plant

12 Jul 2022

PSALM read news articles yesterday reporting that San Miguel Corporation’s South Premiere Power Corporation (SPPC) is seeking the approval of the Energy Regulatory Commission (ERC) for temporary price adjustment of its 2019 power supply agreement with Manila Electric Company allegedly due to staggering increases in fuel prices.

Based on PSALM’s records and billings, SPPC has overdue payables to PSALM amounting to PHP34.04 Billion as of 30 June 2022. This amount is based on PSALM’s computations of generation payments for the 1200MW Ilijan Natural Gas Combined Cycle Power Plant (Ilijan Plant) that takes into consideration the prices in the Wholesale Electricity Spot Market (WESM). PSALM’s computation based on WESM prices is in accordance with the provisions of the Independent Power Producer Administrator Administration Agreement (IPPA-AA) between PSALM and SPPC dated 11 May 2010.

SPPC’s computations of generation payments were based on its power supply agreement with Meralco, of which PSALM is not a party. While SPPC has already remitted to PSALM about PHP285.37 Billion as of 30 June 2022, it is PSALM’s view that these remittances of SPPC were insufficient because they were not based on the WESM prices.

To date, there is ongoing litigation between PSALM and SPPC in the Regional Trial Court of Mandaluyong City to determine, among others, the correct computation of the generation payments. The transfer of the Ilijan’s ownership from PSALM to SPPC in June 2022 was done in compliance with the Writ of Injunction issued by RTC Mandaluyong and without prejudice to the eventual outcome of the said case. At the moment, the case is in the pre-trial stage.

It is PSALM’s position that the payables of SPPC due to PSALM should be in accordance with the provisions of the IPPA-AA. However, while the aforementioned case is still unresolved, should there be any rate increase, then SPPC’s remittances to PSALM should be recomputed and adjusted accordingly, consistent with SPPC’s own legal position that such remittances to PSALM should be based on the power rates in its power supply agreement with Meralco.

Strategic Communications and Partnership Division
Tel. No. (632) 9029067