ERC pricing, regulation sought for 3rd party-procured LNG

Published January 13, 2021, 7:00 AM

by Myrna M. Velasco

A price-setting and regulation of liquefied natural gas (LNG) procured through third party access (TPA) shall be subject to a regulation of the Energy Regulatory Commission (ERC), which shall also be crafting the warranted TPA Code for the industry.

That has been one of the key recommendations advanced by the Department of Energy (DOE) on the continued public hearing of the Senate Committee on Energy on the proposed Gas Bill, which will serve as the policy guide for investments in LNG facilities in the country.

Photo credit: from DOE

DOE Director Rino Abad, in particular, told the legislative body that the ‘commercial aspect’ of the TPA operations shall be delegated to the regulatory ambit of the ERC; while the energy department will take care of the policies on facility developments, standards-setting for safe operations of LNG terminals; and ensuring gas supply.

On the part of the ERC, he said, the agency “should be focusing on the commercial part, thus, affecting the commercial effect on how the parties transact with each other” – primarily the owner of the terminal which is providing third party access to its excess capacity and its gas purchasers.

Abad indicated there should be functional unbundling on the policy crafting for the development of the gas infrastructure facilities and that shall be within DOE’s scope; and the regulation even for TPA with the LNG terminal shall be with the ERC.

“Our proposal – rather than divide the function by structure, meaning, regas terminal versus transmission — our proposal is, we divide it by regulatory framework, so what we’ll focus on is for the DOE side, we focus on the development plans, supply and standards setting,” Abad reiterated.

He added “now, the way we think about ERC in relation to these facilities –what we propose is that, they will be handling the implementation of the TPA Code, because these are really in essence commercial transactions; and then the utility for the natural gas transmission, the utility service fee-setting; and the Utility Code.”

Senate Committee on Energy Chairman Sherwin T. Gatchalian emphasized that the DOE proposal diverts from the conceptual framework of the current form of the Gas Bill, thus, he noted that the legislative body will need further study on the inputs of the department.

“We will study your (DOE’s) proposal. Because in our concept, the terminal is non-public utility and it is deregulated, so there should be no government regulation in terms of the fees that they will be charging,” Gatchalian pointed out.

The solon explained that based on their current assessment, “the government will only regulate and monitor in so far as third party access is concerned, making sure that excess capacity is offered.” He stressed the DOE proposition is “a different concept from what we have in mind but we will discuss that further in the technical working group as to which concept will be more efficient.”