ERC clarifies ‘longstop date’ in PSAs
By Lenie Lectura – August 27, 2024
from Business Mirror
The Energy Regulatory Commission (ERC) has cautioned power generation companies against seeking for a termination of their power supply agreement (PSA) earlier than the prescribed period stated under relevant laws and regulations.
In three separate orders promulgated last August 21, the ERC told the Manila Electric Co. (Meralco), GNPower Dinginin Ltd. Co. (GNPD), Mariveles Power Generation Corporation (MPGC), and Excellent Energy Resources Inc. (EERI) that the “Longstop Date” in their respective PSAs should be interpreted and implemented in accordance with the EPIRA, Energy Virtual One-Stop Shop Act (EVOSS), and the implementing rules and regulations and the 2023 competitive selection process (CSP) guidelines.
The ERC earlier received motions to terminate other PSAs because it allegedly failed to act on the application for approval within the six-month “longstop date,” or the period in which the ERC is supposed to approve or disapprove the application of a distribution utility (DU) and its power supplier for the implementation of their PSA. It was the understanding of some that once the “longstop date” is over, the power supplier has the right to terminate the PSA by providing a written notice of such termination to the DU.
The agency clarified that the “longstop date” falls six months after the date of submission of the PSA application for approval to the ERC. However, the ERC stressed that the “longstop date” must still comply with the relevant laws and regulations.
“They have not asked for termination, but we clarified that they cannot just terminate earlier than the period provided under the EVOSS Law and should be with prior ERC approval,” said ERC Chairperson Monalisa Dimalanta.
In the case of Meralco and EERI, the “longstop date” in their joint application for PSA approval is until September 1, 2024. The PSA between Meralco and EERI was filed last February 7. It involves 1,200MW of contracted capacity valid for 15 years starting November 26, 2024.
Meanwhile, the “longstop date” for the PSA between Meralco and GNPD is until August 22. It falls on August 29 for the PSA involving and MPGC.
Meralco’s PSA with GNPD and MPGC was filed on February 22 and February 29, respectively. The PSAs will commence on April 26, 2025 for a period of 15 years. Meralco will source 300MW each from GNPD and MPGC during the validity of the contract.
Aside from clarifying the period covered by the “longstop date,” the ERC said it has 270 calendar days to issue an action from submission of a valid application under the EVOSS Act.
“Considering that the parties did not include in their joint application any prayer for provisional authority, which the commission is duty bound to act upon within 75 days from filing of the application, the timeline applicable for the action of the commission shall be 270 calendar days from filing as provided under the EVOSS Act,” the ERC ruled.
Moreover, the ERC said the reasons for PSA termination should be consistent with the conditions cited in the CSP guidelines and that a prior approval from the ERC must be sought.
By allowing for a unilateral termination by the power supplier on account of non-occurrence of the Commission’s final approval of the joint application on or before the longstop date is inconsistent with the provisions of Section 34 of the 2023 CSP Guidelines.
“The Commission hereby resolves that the Longstop Date should be interpreted and implemented in accordance with relevant laws and regulations, specifically the EPIRA, EVOSS Act, their respective implementing rules and regulations and the 2023 CSP guidelines,” the ERC said.
