EVIDENCE 1

Interpretation of Documents: Interpretation Construed As To Give Effect to All Provisions

Power Sector Assets and Liabilities Management Corp v. Semi-Calaca Power

Petitioner(s): Power Sector Assets and Liabilities Management Corp

Doctrine: In the construction of an instrument where there are several provisions or particulars, such a
construction is, if possible, to be adopted as will give effect to all. [Sec 11, Rule 130]

CASE SUMMARY
Trigger Word(s): 169,000 kW cap
FACTS: PSALM, in its efforts to privatize the assets of the NPC, sold the Calaca Power Plant, which was
eventually acquired by SCPC. In the assignment of rights that occurred, SCPC’s power generation
obligations were specified in Schedule W attached to their contract. However, there arose an ambiguity
regarding the supply of electricity SCPC was supposed to provide MERALCO. SCPC interpreted
Schedule W as requiring SCPC to supply 10.841% of MERALCO's total requirement but not to exceed
169,000 kW in any hourly interval. PSALM contended that there was not meant to be any cap, and that
SCPC was required to supply the entire 10.841% of what MERALCO requires. The ERC ruled in favor of
SCPC, construing the provisions of the contract together to give effect to all of them.

HELD: SCPC’s interpretation prevails, and the ERC did not err in construing the document. The
ambiguity arose because the figure 10.841% did not indicate a base value with a specific quantity and a
definite unit of measurement, while the 169,000 kW figure is not clear as to whether it is a limit. Hence,
the ERC found it proper to synthesize the provisions by reading the 10.841% value together with the
169,000 kW in order to give meaning to both, because to take each provision separately would render
both of them meaningless. To use 10.841% alone as the reference value for MERALCO's contract energy
at any given hour would not be appropriate under the circumstances because SCPC would not know how
much energy MERALCO would need at any given time, leaving them unable to ascertain the energy-
generating capacity of the plant; while to use the 169,000 kW alone would render the “10.841%” figure
meaningless. Hence, the 169,000 kW can only be understood as a cap on the 10.841% value.

FACTS
● President Arroyo signed RA 4136 (EPIRA) into law, intending to facilitate the restructuring of the
electric power industry, which included the privatization of the assets of the NPC among other
things.
○ It created PSALM, a GOCC which took over ownership of the generation assets,
liabilities, independent power producer (IPP) contracts, real estate and other disposable
assets of the NPC.
● Among the assets put on sale by PSALM was Calaca Power Plant, which was acquired by DMCI
in the public bidding, as embodied by an Asset Purchase Agreement (APA) which took effect on
Aug 3 2009.
● On Dec 2, 2009, DMCI transferred all of its rights under the APA to Semi-Calaca Power
Corporation (SCPC) via another agreement signed by PSALM, DMCI and SCPC. Under the
agreement, SCPC took over all the rights and obligations of DMCI under the said documents.
● On the same day, SCPC started providing electricity to customers listed in Schedule W of the
APA, among which is MERALCO. Under the schedule, it was stated that Meralco’s demand was
169,000 kW but there was a “(10.841%)” next to Meralco’s name.
○ SCPC contends that it is obliged to supply 10.841% of MERALCO's total requirement but
not to exceed 169,000 kW in any hourly interval.
○ PSALM, however, contends that SCPC is bound to supply the entire 10.841% of what
MERALCO requires, without regard to any cap or limit.
● During a period of high demand, when SCPC fell short of providing the entire 10.841% required
by MERALCO, the deficiency was filed by supply from the Wholesale Electricity Spot Market
(WESM).

Dizon | A2022
September 21, 2020
EVIDENCE 2
Interpretation of Documents: Interpretation Construed As To Give Effect to All Provisions

○ SCPC blamed this on NPC's and PSALM's nominations in excess of what SCPC claims
to be the 169,000 kW cap or limit in its supply.
○ PSALM disputed the existence of such a cap, noting that SCPC was obligated to supply
the entire 10.841% as stated in the APA.
○ NPC and PSALM billed MERALCO for the electricity delivered by SCPC and that
supplied through WESM.
● The parties went on an exhaustive back-and-forth regarding MERALCO’s payments and billings
pursuant to the dispute in the cap. But after extensive negotiations, PSALM agreed to cap
MERALCO's nominations from the Calaca Power Plant "in any hour up to 169MWh or 10.841% of
each hourly energy nomination submitted by MERALCO to NPC under the MERALCO TSC
effective June 26 2010.
○ However, SCPC argued that the cap should’ve taken effect much earlier, on Dec 2 2009
when the APA became effective.
● Negotiations fell through and SCPC filed a claim with the ERC, which ruled in SCPC’s favor, and
the CA upheld the ruling.
○ The CA sustained the ERC's interpretation of the APA that SCPC's obligation was to
supply 10.841% of MERALCO's energy requirement, but not to exceed 169,000 kW at
any given hour, as such interpretation would reconcile the presence of the two figures in
Schedule W and harmonize the provisions of the said contract.
○ Moreover, they noted the reason why a cap was now in place was because MERALCO
now had numerous suppliers, unlike before when the NPC was the sole supplier.
● PSALM reiterated its stance before the SC, arguing that SCPC merely stepped into the shoes of
the NPC and hence had to assume the same obligations the NPC did.
○ Moreover, they argue that the ERC erred in its construction of the document, claiming
that if they had also paid attention to the special conditions therein, such as the items in
the “Notes” portion1 which, had it been read together with the rest of the conditions,
should have led the ERC to a different conclusion.
● SCPC argued that PSALM's own interpretation would render the implementation of Schedule W
impossible and absurd, because:
○ The figure 10.841%, when observed alone and literally applied, provides no meaningful
reference, because Schedule W itself does not state that the figure refers to 10.841% of
the actual volume nominated for MERALCO. It has no base value and is an incomplete
mathematical statement.
○ Observing the figure 10.841% alone disregards all the other figures that appear in
Schedule W, including the 169,000 kW which appears twice on the schedule..
○ Mainly relying on the Notes and its statement that the figures in the schedule are
"indicative" would render all the figures in Schedule W insignificant, as if concluding that
SCPC's supply obligations are unlimited.

ISSUES + HELD
ISSUE #1: Whose interpretation of Schedule W controls? -> SCPC
● The figures 10.841% and 169,000 kW found in the contract are ambiguous. The former because
it does not indicate a base value with a specific quantity and a definite unit of measurement and
the latter because there is uncertainty as to whether it is a cap or limit on the party's obligation or
not.
○ A close scrutiny of Schedule W indicates that 169,000 kW does not represent 10.841% of
MERALCO's energy requirement. To complete its meaning, the figure 10.841% should
have been followed by a reference value and should have been written as "10.841% of . .
." a specific base reference.
○ To use 10.841% as the reference value alone for MERALCO's contract energy at any
given hour would not be appropriate under the circumstances because SCPC would not
have an idea of how much energy MERALCO would need at any given time and the
capacity that the power plant can generate may not match with it.
1 the “Notes” portion says that the 169,000 kW and all the other figures mentioned therein are only "indicative" and the supply of
MERALCO's energy requirement "will still be based on the hourly/daily/monthly nominated volume per average monthly contract
level."

Dizon | A2022
September 21, 2020
EVIDENCE 3
Interpretation of Documents: Interpretation Construed As To Give Effect to All Provisions

○ To use the nominal figure 169,000 kW alone in reference to MERALCO's contract energy
would likewise not be appropriate because the "10.841%" value written in parenthesis
underneath the name "MERALCO" in the first column of Schedule W cannot just simply
be ignored.
● Hence, the ERC found it proper to synthesize the provisions by reading the 10.841% value
together with the 169,000 kW in order to give meaning to both, consistent with and in relation to
the APA.
○ The various stipulations of a contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly. [Art 1374]
○ In the construction of an instrument where there are several provisions or particulars,
such a construction is, if possible, to be adopted as will give effect to all. [Sec 11, Rule
130]
● Moreover, overturning the ERC's and the CA's interpretation would result in the absurd scenario
of requiring SCPC to supply more than 169,000kW for MERALCO despite the fact that its
contracted demand levels for various customers listed in Schedule W were pegged at 322 MW
only and its dependable capacity is only 330 MW.
○ Calaca Power Plant only produces up to 322 MW in electricity net of plant use; out of
such produced, MERALCO obtains the biggest allocation of 169,000 kW (169 MW),
whereas the rest of the customers share 153,000 kW (153MW).
○ It would be highly unreasonable to require SCPC to allocate even a marginal increase
from 169,000 kW for MERALCO when such would cause it to renege on its obligations to
supply its other customers.
● PSALM argued that the other conditions in the contract, such as the option to enter into back-to-
back agreements with other power generators should SCPC be unable to supply the required
amounts, evidenced the lack of a cap. However, the ERC already pointed out that the APA
contained the following:
○ NPC and PSALM's obligation to supply the entire energy contract to MERALCO,
including the obligation to replace any curtailed energy, was not passed on or assigned to
SCPC.
○ Only the portion of the contract energy as defined in Part I of Schedule W was assigned
to SCPC. Such is clear under Part II of Schedule W, which states: “Neither the
MERALCO TSC nor any portion thereof shall be assigned to the Buyer. It is the Contract
Energy specified in part I that is the subject of the assignment."

RULING: Petition denied.

Dizon | A2022
September 21, 2020