GenCos nix force majeure claims

Published April 16, 2020, 12:00 AM

by manilabulletin_admin

By Myrna M. Velasco

The country’s power generation companies (GenCos) have thumbed down recommendations invoking force majeure (FM) claims under power supply agreements (PSAs), as they noted this will redound to contractual breach and could also impede their capacity to honor financial obligations including with their lenders.

The power producers have been making a riposte to earlier proposals for distribution utilities (DUs) and electric cooperatives (ECs) to call on force majeure claims under their power supply deals with GenCos so electricity rates could be lowered especially during the government-enforced lockdown to contain coronavirus infections in the country.

Atty Anne Estorco Montelibano, executive director of the Philippine Independent Power Producers Association Inc. (PIP¬PA), noted that, “using consumer interest as a guise for undermining power supply contracts should not be allowed, as this will affect the ability of generating companies to pay for fuel, operating costs and even loans.”

When that happens, Montelibano expounded the power generation firms could potentially be rendered “unable to continue operating their plants,” and she emphasized “this can happen quickly, in some cases, within one unpaid billing period.”

She reckoned “mandating generation companies to force majeure claims by DUs/ECs not only disrupts the power supply chain, it is also tantamount to one sector taking advantage of the other.”

Montelibano added “force majeure claims cut both ways, and this will have disastrous consequences if it remains unchecked.”

The organization of the country’s power producers thus sought that the government “be receptive to the perspective that power, like food and water, is an essential service and commodity, most especially during this state of national health emergency.”

Montelibano further noted that “similar to food and water, the power supply chain must not be disturbed and it should be protected.”

She highlighted “any disruption in the power supply chain can result in unrest, in the same way scarcity in food and water can,” adding that “unreliable power or in worst case scenarios, no power, will have an adverse impact on the delivery of health services, as well as governmental functions.”

The PIPPA executive also indicated “having no power can aggravate the anxiety of people who rely heavily on instant information to help them cope with the difficulties of the lockdown.”

Leaning on such premise, PIPPA members assured the public that the power generators “are working tirelessly and remain committed in its mission to ensure that country has stable, reliable and continuous power during these extremely difficult and trying times.”

 
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