The Energy Regulatory Commission (ERC) has allowed First Gen subsidiaries First Gas Power Corp. (FGPC) and FGP Corp. (FGP) to use liquefied natural gas (LNG) as an alternative fuel supply source to run the Sta. Rita and San Lorenzo Gas Plants.
In an order released on March 26, the ERC said this will only be permitted during a fuel supply force majeure.
“The commission will continue to impress upon distribution utilities their obligation to diligently comply with their least cost obligation, particularly in passing on fuel costs to consumers,” according to ERC Chairperson and CEO Monalisa Dimalanta.
“We have consistently ruled that if recovery of certain costs have no basis under the PPAs [purchase power agreements] or power supply agreements, these cannot be passed on to end-users. DUs [distribution utilities] remain as regulated entities and there are basic regulatory frameworks that must be observed in all their dealings.
This obligation cannot be taken lightly as it goes into the core of the privilege under the franchises granted by legislature to DUs,” she added.
The ruling stemmed from the Manila Electric Co.’s (Meralco) application seeking the ERC approval to pass on to consumers the recovery and payment of LNG costs during “test and commissioning,” LNG costs during commercial operations and Malampaya Natural Gas costs under its new Gas Sale and Purchase Agreement (GSPA).
A long-term GSPA was earlier signed by the Malampaya consortium—led by Prime Energy Resources Development B.V.—with the wholly owned subsidiaries of First Gen Corp. that operate gas-fired power plants.
Prime Energy recently awarded a major contract for the Malampaya Phase IV Project to Noble, one of the largest offshore drilling contractors in the world.
The $69.9-million contract is for the use of Noble’s deepwater drillship “Noble Viking” to drill two deepwater development wells in the Camago and Malampaya East fields, as well as a third exploration well, Bagong Pagasa, approximately 15 kilometers north of Malampaya.
“We are very proud of the milestones that the hard-working team of Filipinos in Prime Energy achieve month on month to ensure that we are on track for the planned drilling in 2025,” Prime Energy Managing Director and General Manager Donnabel Kuizon Cruz earlier said.
“Malampaya gas has served us for more than 20 years. We are committed to continue providing reliable flow and supply of indigenous gas to our customers, protecting Filipino consumers from volatile forces that affect oil and gas prices.”
Service Contract no. 38, which governs the Malampaya project, was extended for another 15 years or until February 2039. The consortium has remitted more than $13.5 billion from 2001 to end-2023.
Meanwhile, Meralco welcomed the decision of ERC that allowed the use of LNG as an alternative fuel during fuel supply force majeure events for the gas-fired power plants contracted with the utility firm.
“Being a highly regulated entity, we strictly abide by the rules and regulations governing our franchise. This includes being very transparent about our power supply sources and energy mix,” Meralco Vice President and Head of Corporate Communications Joe R. Zaldarriaga said.