The "gas aggregation" scheme being proposed by Prime Infrastructure Capital Inc. of the Razon group, will help soften electricity rates for consumers because the scheme will lessen the risk of gas plant-developers in their fuel procurements.

This is according to ENEX Energy Corporation Chairman Eric T. Francia, who said that “the aggregator concept is very promising because it takes out several pain points in the sector … it optimizes our limited resource.”

The Ayala-led ENEX Energy is one of the players in the power industry that has plans of putting up a gas plant via its proposed Batangas Clean Energy Inc. (BCE), which is targeted to be concretized in partnership with US firm Gen X Energy.

The Razon group’s plan for gas aggregation will be carried out by leasing the liquefied natural gas  (LNG) import facility of First Gen Corporation in Batangas.

In Francia’s view, if the gas purchases of the entire country will be pooled by just one entity which is also the owner of the only commercially-operating domestic gas field, then “you can be smarter in terms of the use of your indigenous resource, which is Malampaya.”

He illustrated that “for example, the Batangas Clean Energy, if there was no aggregator, it might be forced to build its own terminal - that’s expensive and that would eventually find its way to the customer, right? We don’t need several terminals.”

By building a calculated synergy between imported LNG to whatever additional production that can still be lifted from Malampaya, Francia explained that the gas off-takers in the power sector could then choose when to purchase LNG for their power facilities and when to opt for Malampaya gas, depending on the swing of prices in the world market.

“When the gas prices are high, you use Malampaya and when gas prices are low locally, you don’t use Malampaya. That is a very smart way to optimize our resources…it solves a pain point among developers, generators,” he noted.

Compared to the oil de-linked prices of gas in the US and European jurisdictions, the Asian market still heavily ties its gas prices with the highly volatile oil prices -- plus there’s cost for logistics in bringing gas to Philippine shores, hence, it is widely perceived that LNG will have higher price compared to indigenous gas.

Francia said the other advantage of gas aggregation will be having relatively common fuel pricing for all power generators which will be offering their capacities via competitive selection process (CSP) that will be carried out by either Manila Electric Company (Meralco) or other distribution utilities.

“There is a common pricing for everyone. It makes a CSP much simpler because it standardized the pricing for the fuel,” he stated.

Francia expounded that in the case of Meralco or other distribution utilities (DUs), they can then just call for bids “based on capacity and operations and maintenance,” although he qualified that such precept is based on assumptions that fuel pricing will be transparent as anchored on regulatory approvals.

“It (gas aggregation) is a de facto quasi monopoly subjected to regulations… I think it works very well. I really hope the concept pushes through,” the Ayala executive pointed out.

By taking away that hurdle on fuel procurement, Francia emphasized that the generation companies (GenCos) “can just focus on building a power plant; and not be bothered with fuel and infrastructure. I see the benefits of that.”

The only caution he sounded off is the concentration of too many gas facilities in Batangas as he noted that it might also be prudent to de-risk that by considering parallel developments in Northern Luzon, primarily in the Bataan area.