Invoking force majeure option up to electric coops, says ERC

By Delmar Carino

ELECTRIC COOPERATIVES (ECs) have the call to invoke the Covid 19 pandemic as a force majeure in case they were not able to fully use their contracted capacity during the period of enhanced community quarantine (ECQ).

But the Energy Regulatory Commission (ERC) said such option lies with the electric cooperatives and not with the commission since force majeure is a provision in power supply agreements (PSAs) that only the parties involved have the right to invoke.

The ERC also said the same goes through with any plea for any adjustment in the other fixed costs of the generation charge as stated in the PSAs such as capital recovery fee (CRF) and minimum energy off-take (MEOT) charge.

Force majeure refers to unexpected and unforeseeable events. As part of a contract, they legally excuse the parties affected from performing an obligation. 

In the case of ECs, it is up to them to decide if the pandemic is considered as a force majeure.

The PHILRECA Partylist and the National Association of General Managers of Electric Cooperative (NAGMEC) earlier wrote the ERC to indorse or issue an advisory for generation companies to consider the pandemic as a force majeure and allow the adjustment of fees the ECs pay for their contracted capacity and other fixed charges since many of them were unable to use such capacity at 100%.

However, Agnes Devanadera, ERC chair and chief executive officer, said the conditions that allow ECs to invoke force majeure are defined in the power supply agreement and the ERC has no legal personality to come in as a party and state that the pandemic is a force majeure.

“Whether or not to invoke the force majeure event provision is a decision of the parties based on the specific provision of each power supply agreement, ” the ERC chair told Rep. Presley de Jesus of PHILRECA Partylist and Allan Laniba, NAGMEC president.

The ERC added that it could not also advise power suppliers to lower the capital recovery fee (CRF) and minimum energy off take (MEOT) charged by generators on distribution utilities since the move will be unwarranted.

“It must be stressed that the approved CRF, whether provisional or final, were subjected to scrutiny and evaluation by the ERC on a case to case basis after consideration of the evidence submitted by the parties to the PSA. As such the determination of the CRF on each and every PSA varies from one another,” the ERC said.

In similarly denying PHILRECA and NAGMEC’s request of adjustments in the MEOT, the commission said: “While PSAs are subject to ERC’s approval, its character as a consensual contract does not cease. In this regard, the decision to discuss any possible amendment to the MEOT and the contracted capacity provisions in the PSA belongs to the parties of the contract. Hence, the initiative to adjust the MEOT which ultimately leads to an amendment of the original PSA must come from the parties to the PSA, subject to approval by ERC.”       

Explaining its decision, the ERC said that the ECQ did not affect all ECs similarly.

“While some experienced decrease in demand, there are some that experienced an increase in demand due to the fact that most of their customers are residential customers,” it said.

The commission said the varying effects of the ECQ across ECs make it imperative for them to make their own careful assessment of the impact of the ECQ on their operations taking into account the following – the situation of their  distribution system, load profile, economic profile of their franchise areas and other peculiarities that are unique to each EC.    

“A universal advisory allowing ECs to invoke the FME provision, adjust approved CRF and reduce the MEOT or Contracted Capacity will not address these different situations, and hence, not applicable to all ECs nationwide,” the ERC said.