Rural co-ops seek force-majeure relief from power contracts

By Adam J. Ang – May 27, 2020 | 8:43 pm
from Business World

RURAL power utilities are asking the Energy Regulatory Commission (ERC) to ease their obligations under power contracts entered into with generating companies, while promising to provide consumers relief from bill payments as ordered.

The Philippine Rural Electric Cooperatives Association (Philreca) asked the ERC Wednesday to issue a new advisory allowing electric cooperatives to invoke force majeure clauses in their power supply agreements (PSA).

“As part of our advocacy to provide affordable access to electricity, Philreca asks the indulgence of the Regulators as we appeal again the issue on Prompt Payment Discounts, minimum energy off-take, fix charges, and ‘force majeure’ provisions for the issuance of guidelines or advisory for the benefit of the member-consumer-owners (MCO),” Philreca Executive Director Janeene D. Colingan said in a statement.

A force majeure event is invoked when parties to a contract deem it impossible to fulfill their obligations.

Asked to comment, the ERC said the utilities must first discuss with their partners any changes they would like to make in their agreements, noting the varied impact of the government’s quarantine measures to power utilities.

“The position of the commission is that any modifications to the approved PSA should be discussed by the parties first as we see different impact of the community quarantine to the DUs (distribution utilities),” ERC Spokesperson Floresinda B. Digal told BusinessWorld.

A uniform order on relief for all utilities may not supersede such negotiations, she added.

In April, Manila Electric Co. (Meralco) invoked force majeure in its power contracts, which resulted in the lowering of generation charges in its customers’ May electricity bills.

Philreca warned that higher generation charges will be passed on to customers if the regulator does not allow the removal of such bill components.

“As we have reiterated before, if no intervention is done, paying these fixed charges… will significantly result in a higher generation charge/component in a consumer’s electricity bill,” Ms. Colingan said.