The Energy Regulatory Commission has granted the plea of power utility giant Manila Electric Company (Meralco) and its affiliate-firm Panay Energy Development Corporation (PEDC) on their contract price adjustment.

In tandem with that ruling of the Commission had also been the approval on a termination of the power supply agreement (PSA) previously inked by Meralco and PEDC.

The regulatory body emphasized that its verdict on the permitted tariff adjustment had been anchored on ‘change in circumstance’ (CIC) provision in their power supply deal.

The petition was filed jointly by Meralco and PEDC on January 20 last year; when coal prices have skyrocketed above $400 per metric ton as an aftermath of the Russia-Ukraine war.

In a statement to the media, the ERC specified that the decision on the Meralco-PEDC rate adjustment and warranted contract termination garnered 3-2 vote; with Chairperson Monalisa C. Dimalanta issuing a separate opinion; while Commissioner Catherine P. Maceda rendered a dissenting opinion.

The industry regulator expounded that the decision itself was dated March 8, 2023; but the actual release of the ruling was just on August 29 this year.

“Meralco and PEDC argued that the significant increase in global cost of coal or the fuel prices for 2022 have led to PEDC suffering losses in the amount of P962,240,261.00 as of September 2022,” the regulatory body has stipulated.

The Commission qualified though that “upon verification of document submitted by the parties, the ERC computed an actual loss of P884,545,417.00,” as reckoned on the specified date.

Given such financial strain, the ERC conveyed that “on June 23, 2022, Meralco and PEDC filed the termination motion, citing PEDC’s inability to meet its contractual obligations by virtue of the losses.”

It is worth noting that when “change in circumstance’ was invoked in another joint tariff adjustment petition by Meralco and the subsidiary-firms of SMC Global Power Holdings of the San Miguel group in their PSAs, the applications had been junked by the ERC.

That then stirred up series of controversies in the denied rate hike application; which subsequently led to intensified legal battle; and the unwarranted consequence of the skirmish had been eventual scrapping of the power supply deals.

In the Meralco-PEDC case, the ERC stated that “in granting the price adjustment motion, the Commission was unanimous in the finding that the PSA in this case allowed for price adjustments in case of ‘extraordinary event’…that results in an increase of actual fuel costs from the fuel prices at the time of bid submission.”

The ERC further noted that “in its evaluation, the majority of the Commission ruled that such conditions specifically defined by the ‘change in circumstance” provisions found in the PSA were present in this instance.”

The regulatory agency similarly ruled that “there was basis to terminate the PSA on the basis of mutual agreement of the parties,” adding that “Meralco and PEDC stipulated in the PSA that the parties had the option to terminate at the instance of a “change in circumstance”, as in this case.”

Dimalanta, in her separate opinion, averred that “while there is substantive basis to allow the termination of the PSA, the parties should be penalized for failing to observe the procedural requirements provided in the PSA itself to effect such termination.”

In Maceda’s case, the ERC conveyed that she 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.”