PSALM thumbs down capacity purchase cut

By Myrna M. Velasco – March 29, 2020, 10:00 PM
from Manila Bulletin

State-run Power Sector Assets and Liabilities Management Corporation (PSALM) said it will not concur to capacity off-take (power purchase) reduction during the enhanced community quarantine (ECQ), even with proposals that it can invoke a ‘force majeure’ condition.

The company stressed that force majeure event may warrant payment extension, but it opined that such may not jus¬tify reduction in capacity payments for volume purchases that the parties had agreed on contractually.

“While force majeure justifies extension of the period to pay, the contracts with PSALM do not indicate suspension or lowering of the minimum energy off-take or of the minimum charges based on the contract energy per billing period,” the government-owned firm has stipulated.

It added “the contracts require that the force majeure event must render it impossible for a party to fulfill its obligation, such as when its operations are totally paralyzed to receive the supply of energy.”

The firm expounded that such force majeure event shall not just be based on a “mere incapacity to consume the contract energy or inability to meet the minimum charges or off-take.”

Force majeure entails the occurrence of unforeseeable circumstances that could prevent parties from fulfilling provisions of their contract.

With the novel coronavirus (COVID-19) pandemic, there had been proposals for generation companies or power suppliers to invoke force majeure under their power supply agreements, so the mandated capacity off-takes can be temporarily waived, and such may subsequently bring down rates for power consumers.

But in the grand scheme of things, it appears that state-owned PSALM has been the first one to pull the plug on that recommendation for the power industry during these trying times.

The company similarly indicated that it is extending payments and collections for 30 days from array of customers and contract counter-parties; but such shall only be for billings falling due within the prescribed duration of the enhanced community quarantine which is from March 15 to April 14 this year.