The Energy Regulatory Commission (ERC) has clarified when price adjustments in Power Supply Agreements (PSAs) may be allowed, explaining that such changes are governed by established legal standards on Change in Circumstances (CIC) rather than discretionary regulatory action.

The clarification was discussed during the ERC’s press conference on December 12, 2025, held at its main office in Pasig City, where the Commission walked through recent regulatory decisions and legal contexts affecting the power sector.

PSAs, long-term contracts between power generators and distribution utilities, usually have fixed pricing approved by the ERC. But recent fuel price volatility and supply disruptions have led some generators—including ACEN and San Miguel Global Power Holdings Corp. (SMGP)—to seek CIC-based adjustments, sometimes involving billions of pesos. 

SMGP, for example, has pursued around PHP 34 billion from terminated PSAs on CIC grounds, with the Court of Appeals directing ERC to act on pending petitions. Amid public concern over rising electricity rates—such as Meralco’s 72-centavos/kWh increase earlier this year—the ERC’s clarification aims to define when PSA price adjustments are legally allowed, providing certainty to suppliers and consumers while guarding against arbitrary hikes.

According to ERC, CIC applies when abrupt and extraordinary events materially alter the assumptions underlying an approved PSA. These circumstances are evaluated through a motion for price adjustment due to Change in Circumstances, filed by affected parties and assessed on a case-by-case basis.

The Commission emphasized that CIC is rooted in judicial rulings, particularly the MERALCO–SMEC PSA case, where the Court of Appeals, later upheld by the Supreme Court, recognized that certain global disruptions can justify contract adjustments.

Examples cited as constituting CIC include the COVID-19 pandemic, Indonesia’s coal export ban, Russia’s invasion of Ukraine, global logistics disruptions, and declining coal output from major mining hubs. ERC said these events caused severe disruptions to fuel supply chains, meeting the legal threshold for CIC.

ERC framed CIC as a legal safeguard rather than a mechanism for routine contract renegotiation, noting that not all cost increases qualify. Only events that are extraordinary, unforeseeable, and external—based on court-defined standards—may be considered in evaluating PSA price adjustments.

With CIC continuing to surface in disputes involving long-term power contracts, how might ERC’s clarification shape expectations around when PSA prices can legally be adjusted?

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