The regulator-approved pass on of the deferred charges of First Gen Corporation on its gas use for power generation and capital recovery on liquefied natural gas (LNG) import facility investment will hike Meralco rates by P0.32 to P0.33 per kilowatt hour (kWh) starting in its October billing to customers, according to the Energy Regulatory Commission.

“Our estimate is about additional P0.30 per kWh because of the LNG use and rebased Malampaya gas price, and additional P0.02 to P0.03  (per kWh) on the differential to be collected over 12 months,” ERC Chairperson Monalisa C. Dimalanta said.

She qualified though that “the final amount will depend on actual blend of LNG and Malampaya,” in reference to the gas supply being fed into the First Gen plants that have been supplying electricity to Meralco.

The ERC primarily stipulated in its ruling that Meralco can “collect the costs over a period of 12 months commencing from the October billing period.”

The regulatory body specified in its resolution that it permitted the First Gas Power Corp and FGP Corp subsidiaries of the First Gen group “to recover the difference between the previously approved pass-through costs and the landed cost of liquefied natural gas (LNG) and the new gas sale and purchase agreement.”

Lopez-led First Gen Corporation has intensified its plea this week for an ‘immediate resolution’ of its dilemma over deferred cost recoveries relating to the gas use of its gas-fired power plants in Batangas, including cost component on investment for its LNG import facility.

In an interview with reporters, First Gen President and COO Francis Giles B. Puno indicated that the company has defended its case with the policymakers and regulators why it shall be allowed to recoup costs that would correspond to its gas purchases as well as the capital it invested in the floating storage unit (FSU) for imported LNG.

“We have defended our case with the DOE (Department of Energy) and with the regulators, they know it’s a project of national significance but it’s a little strange when you have a project of national significance, but then you cannot get the recovery,” he said.

Puno has not quoted an amount on the scale of deferred cost recoveries that had been pending for approval by the ERC in recent months, but according to industry sources, that already hovered at more than P2.0 billion as of mid-year.

Given the company’s predicament of not being allowed to fully pass on its warranted cost recoveries, the First Gen executive lamented that they were already on “a painful transition because we end up absorbing these costs.”

Relative to that development, Puno intimated that ‘market intervention’ that is akin to deferred costs pass-on could be giving wrong signals to investors, which is a counter-productive move if the government is really serious in attracting fresh capital for much needed baseload capacity additions in the system.

“When the market intervenes, it sends wrong signals also to the investors, why will it build new capacity? So, in a lot of ways, we're in a situation today where we need to provide the right signals for investors, including for First Gen to continue to grow and invest in new assets, but they have to be given the right signals,” he stressed.

Puno expounded “we just have to hope that logic, and let's say, reasonable thinking will come in and say: yes, they deserve a recovery.”

He further stated “I don't think it's a lack of investor interest. We want to invest more… it's lack of clarity in terms of us being able to predict the revenue we will generate with that investment, because it's a big investment.”