The Energy Regulatory Commission (ERC) is requiring power utility giant Manila Electric Company (Meralco) to file a formal application for the pass-on of fuel charges that shall be reckoned from the new gas sale and purchase agreement (GSPA) that First Gen Corporation had signed with the Malampaya consortium.

ERC Chairperson Monalisa C. Dimalanta said “we need Meralco to do a filing, as needed, for proper evaluation of the fuel arrangement.”

She emphasized that “the prior ERC/ERB (Energy Regulatory Board) approval are based on different circumstances.”

The defunct ERB, in particular, was the precursor-agency of the ERC that approved previous power purchase agreements (PPAs), including prior tariff pass-on for capacities feeding on the output of the Malampaya field -- and that was the regulatory regime prior to the passage of the Electric Power Industry Reform Act (EPIRA) in 2001.

The first GSPAs of First Gen for its Santa Rita and San Lorenzo plants that was signed with the old shareholders in Malampaya, led by then field operator Shell Philippines Exploration B.V. (SPEX), already lapsed this year.

Following that, a new GSPA was inked this January 2024 with the new consortium comprising of new field operator Prime Energy Resources Development B.V. (PERD) of the Razon group, along with UC38 LLC of businessman Dennis Uy’s Udenna group and state-run Philippine National Oil Company-Exploration Corporation.

Based on Prime Energy’s announcement, the new GSPA is a long-term contract, but there were no details on the agreed tariff as well as on the formula applied in the contract.

The extended service contract (SC 38) for continued exploration and production (E&P) at the Malampaya field was signed by President Marcos in May last year – and that effectively stretched the operating life cycle of the depleting gas facility for additional 15 years or from 2024 to 2039.

The Department of Energy (DOE) so far hinted that the new contract for the Malampaya gas to be fed to gas-fired power plants will remain oil-linked, similar to what has been employed as a formula in the first GSPAs.

Further, the ERC has directed Meralco as well as First Gen to be transparent in the pass-on of any additional charges on supply procurement coming from gas capacities – be it with the Malampaya gas or on the plants’ use of imported liquefied natural gas.

As of press time, First Gen has not responded yet to media queries on probable revenue shortfalls it may incur while awaiting regulatory validation and eventual approval of its fuel pass-through charges.

On Wednesday (February 14), Meralco indicated that it will refund in its March billing the initially passed on increase in generation charges that were invoiced by First Gen; which in turn, had been reflected by the utility firm in its February billing cycle.