ERC: PSA price hikes allowed only in rare cases

The Energy Regulatory Commission (ERC) clarified that price adjustments in Power Supply Agreements (PSAs) are legally allowed only under extraordinary and abrupt events classified as Change in Circumstances (CIC).

The clarification was made during a press briefing on Dec. 12, 2025, at the ERC’s headquarters in Pasig City, where the Commission outlined recent rulings and legal frameworks affecting power sector pricing.

PSAs are long-term contracts between power generators and distribution utilities, typically locked in at fixed rates approved by the ERC.

However, recent global fuel price shocks and supply chain disruptions have led power firms such as ACEN and San Miguel Global Power Holdings Corp. (SMGP) to seek adjustments under CIC provisions.

SMGP, for instance, is pursuing approximately PHP 34 billion in claims from terminated PSAs, citing CIC-related grounds, with the Court of Appeals having ordered the ERC to resolve its pending petitions.

Amid public scrutiny over rising electricity costs—highlighted by a PHP 0.72 per kilowatt-hour increase implemented by Meralco earlier this year—the ERC aimed to bring clarity and assurance to consumers and energy providers alike.

According to the Commission, CIC applies only when “abrupt and extraordinary events materially alter the assumptions” of an approved PSA.

Any PSA party requesting a price adjustment must file a formal motion citing CIC and undergo a case-by-case review process.

The ERC stressed that CIC is anchored in legal precedent, particularly the landmark MERALCO–SMEC PSA case, where the Court of Appeals, later upheld by the Supreme Court, affirmed that global-scale disruptions may justify PSA amendments.

The Commission cited several examples that meet the CIC criteria, including the COVID-19 pandemic, Indonesia’s coal export ban, Russia’s invasion of Ukraine, global supply chain breakdowns, and a sharp drop in coal output from key mining regions.

ERC stated these events severely disrupted global fuel supply systems and satisfied the threshold for CIC under Philippine legal doctrine.

It emphasized that CIC is a protective clause rooted in law—not a routine tool for contract renegotiation—and does not apply to common or expected price fluctuations.

Only circumstances deemed extraordinary, unforeseeable, and external to the parties involved qualify for PSA price changes, the ERC concluded.