The Energy Regulatory Commission (ERC) has approved a second interim extension of the power supply agreement between Manila Electric Company (Meralco) and First Gas Power Corporation, a subsidiary of First Gen Corporation, allowing continued electricity supply from the Santa Rita gas-fired power plant until June 25, 2026.

The approval covers a Joint Motion filed by Meralco and First Gas Power Corporation seeking to extend the interim arrangement under the same terms and conditions previously approved by the Commission. The earlier interim extension was set to expire on January 31, 2026.

The ERC said the interim extension is necessary as the parties are still negotiating a formal amended power supply agreement (PSA). A PSA is a contract that sets how much electricity is supplied, at what price, and under what conditions. The interim approval allows the supply arrangement to continue while negotiations remain ongoing.

In granting the extension, the ERC cited the Department of Energy’s position that there is no legal impediment to extending the PSA. The Commission noted that the agreement was approved prior to the establishment of the Electric Power Industry Reform Act (EPIRA) and is therefore not subject to the Competitive Selection Process (CSP), the bidding requirement applied to newer power supply contracts to ensure competitive pricing.

The ERC also emphasized energy security considerations as one of its main reasons, particularly the role of the Santa Rita plant in supporting the Luzon grid. The Commission said gas-fired generation provides flexible and reliable capacity, which is critical during periods of high electricity demand.

According to the Order, terminating the PSA could force the shutdown of the Santa Rita plant. Which then can potentially trigger broader disruptions due to its technical interdependence with the Malampaya natural gas facility and First Gen’s liquefied natural gas (LNG) terminal. The ERC warned that such a scenario could affect grid reliability and supply adequacy.

The Commission further noted that the loss of Santa Rita’s capacity could lead to higher spot market prices and increase the chances of yellow or red alerts, especially during the summer months when electricity demand rises drastically.

Under the approved extension, the ERC allowed the pass-through and recovery of attendant costs related to the interim arrangement, subject to existing regulatory rules. Pass-through costs refer to expenses that utilities are allowed to recover from consumers, provided these are reviewed and approved by the regulator. The Order did not introduce any new pricing structure.

The Order was promulgated on January 30, 2026, following deliberations held on January 29, 2026, and was signed by ERC Chairperson and CEO Francis Saturnino C. Juan.

As the ERC frames the approval as a temporary measure, how long can interim extensions serve as a stopgap before longer-term power contracting decisions are finalized?

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