The lockdown as force majeure

There's some import on the plea of the country's electric cooperatives for the power generators to loosen up on the fixed charges for power supply due to the lockdown in March and April that practically cut to half the business of electric distribution.

Indeed, the obligation of distribution utilities to pay the following dues -- capacity fee, capital recovery fee and minimum energy off take or MEOT charge -- is embedded in the power supply contract but the unseen enemy that is Covid that has pushed the distribution utilities to the edge deserves some serious consideration.

The Energy Regulatory Commission (ERC) earlier thumbed down the plea of the Philippine Rural Electric Cooperatives Assn. (PHILRECA) and the National Assn. of General Managers of Electric Cooperatives (NAGMEC) that the state regulator would issue an advisory, or perhaps, a directive, for power suppliers to provide some windows of adjustment on the fixed charges to give some reprieve to the electric cooperatives (ECs).

It's undeniable that the ECs suffered much from the ECQ which the national government directed to prevent the pandemic from getting worse. Almost all the businesses and commercial establishments closed down, resulting to a huge dip in sales. One would argue, however, that the consumption of residential consumers surged during the ECQ period but the lost revenue from commercial and industrial customers are far more debilitating that residential sales.

This has gravely impacted on the ability of the ECs to timely, if not fully, pay their capacity fee, capital recovery fee and the MEOT charge.

But the ERC said that as regulator, it cannot dictate on the power suppliers to relax on the said generation charges. While admitting that the lockdown could be a case of force majeure, the ERC said the ECs should be the proper parties to invoke the same. Thus, in a letter to PHILRECA and NAGMEC dated April 30, 2020, the rate regulator said the prayer for any adjustment in the fixed charges would be "unwarranted."

We understand what the ERC meant. As a state regulator, directing the power suppliers to give cushion to the fixed charges would be a case of undue interference and breach of the constitutionally guaranteed provision on the sanctity of contracts. But we, too, take the floor for the ECs whose plea before the ERC had some precedents. The ERC earlier issued a directive for all distribution utilities to give their customers a 30 day reprieve from paying their bills. No disconnection and no arrears and penalties either. Then it issued another order – that ECs should allow their clients to pay in four equal monthly installments. In addition, the ERC also suspended the collection of FIT-All and other universal charges.

We know that these charges are related to rates. The commission has jurisdiction to issue modifications on their collection. But perhaps the compromise on the fixed charges for generation is for the ERC to issue an advisory, a plain advisory that takes the form of its literal sense -- an advice or a suggestion.

The power suppliers may or may not listen. They may even deny that the lockdown is a case of force majeure that would push the ECs no option but to go to court to litigate. But that would draw the line for a costly and protracted legal battle. Yes, there is a well defined contract to deal with. But during these times, let's go away from being too legal and businesslike. What is legal may not necessarily be ethical. The lockdown adversely affected the sales of the ECs. The lockdown was not their own making.

Here, soft hearts must prevail. And for sure, the ERC's compassion must come to the fore.