ERC clearance needed before passing on LNG costs


The Energy Regulatory Commission (ERC) has explicitly stated that distribution utilities (DUs), including the Manila Electric Company (MERALCO), must obtain clearance before passing on costs associated with procuring from liquefied natural gas (LNG) plants. 

ERC noted that the call includes MERALCO’s new gas sale and purchase agreement with First Gas Power Corporation (FGPC). 

“On the basis of the foregoing, we are constrained from giving any clearance for the recovery of such costs if MERALCO itself has not completed its validation or provided the results of such validation to the Commission. Pending MERALCO’s validation of the basis of such costs to the consumers may be premature,” ERC Chairperson Monalisa C. Dimalanta said. 

If charges were already passed on by a DU before regulatory clearance issuance, the power utility is obligated to refund the collected charges.

ERC pointed out MERALCO’s February billing, which saw a P0.5738 per kilowatt-hour (kWh) rate hike mainly due to sourcing more expensive supply from contracted power producers, necessitating validation before cost adjustments.

The increased charges from MERALCO’s independent power producer (IPPs) contracts and power supply agreements (PSAs) contributed to the overall generation charge hike.

MERALCO noted a P1.4764 per kWh spike in its IPP charges, attributed to higher fuel costs of Sta. Rita and San Lorenzo power plants of FGPC, stemming from the plants’ use of imported LNG, which is costlier than Malampaya’s indigenous gas.

ERC emphasized the necessity for MERALCO to complete validation justifying the rate adjustment following the signing of a new GSPA between the Malampaya consortium and First Gen Corporation.

MERALCO said that it is ready to issue refunds to its consumers for the costs incurred from the electricity sourced from the Malampaya gas field. 

In a report by Business World, MERALCO first vice president and head of regulatory management Jose Ronald Valles said that the company is ready to implement a refund in generation charges corresponding to the increase of First Gas plant’s pricing for the January supply month.