ERC grants Meralco-PEDC move to end supply deal
THE energy regulator has granted the joint move by Manila Electric Co. (Meralco) and Panay Energy Development Corp. (PEDC) to terminate their power supply deal.
In a media release on Thursday, the Energy Regulatory Commission (ERC) said it had granted the joint motion for contract termination filed by the companies on June 23, 2022, citing PEDC’s inability to meet its contractual obligations because of the losses it incurred.
The regulator made the decision on March 8, 2023 and released it on Aug. 29, 2023 via a vote of 3-2, with ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta issuing a separate opinion and Commissioner Catherine P. Maceda issuing a dissenting opinion.
Meralco and PEDC cited the “change in circumstance” provisions in their power supply agreement (PSA) as the reason for the termination.
In granting the termination motion, the regulator said the majority of the commissioners found that there was a basis to terminate the PSA as mutually agreed by the parties.
It said Meralco and PEDC stipulated in their PSA that they had the option to terminate at the instance of a “change in circumstance,” as in this case.
The termination motion followed the parties’ joint motion for contract price adjustment filed on Jan. 20, 2022, citing the “change in circumstance” provisions in their PSA.
The companies argued that the significant increase in the global cost of coal or fuel prices for 2022 had led to PEDC suffering losses amounting to about P962.24 million as of September 2022.
The ERC said that upon verification of the documents submitted by the parties, it computed an actual loss of around P884.55 million as of that date.
In granting the price adjustment motion, the commission was unanimous in finding that the PSA allowed for price adjustments in case of an “extraordinary event” that “results in an increase of actual fuel costs from the fuel prices at the time of bid submission” under certain conditions.
The ERC said that in its evaluation, the majority of the commissioners ruled that such conditions specifically defined by the “change in circumstance” provisions found in the PSA were present in this instance.
In her separate opinion, Ms. Dimalanta said that by filing the termination motion before the commission decided on the price adjustment motion, the parties are deemed to have abandoned their request for price adjustment.
She added that while there is a substantive basis to allow the termination of the PSA, the parties should be penalized for failing to observe the procedural requirements in the PSA for the termination.
In her dissenting opinion, Ms. Maceda voted to deny the termination motion, price adjustment motion, and prayer for recovery of PEDC’s alleged fuel losses, “principally for failure of the parties to observe the conditions and processes required under the PSA that they executed.”
