Order on NatGas a mere finalization of provisional authority - ERC

The Energy Regulatory Commission (ERC) assures the general public that the permanent authority it granted on the joint application (docketed as ERC Case No. 2004-52) of the National Power Corporation (NPC) and the Power Sector Assets and Liabilities Management Corporation (PSALM) for the approval of the Gas Supply and Purchase Agreement (GSPA) is a mere finalization of the provisional authority that had long been implemented, thus will not have an upward impact on the current electricity rates.

“The reported PhP26.195 Billion NatGas (Natural Gas) costs pertain to the shortfalls (i.e., gas not taken) incurred for the period October 2001 to December 2004 which were not at all charged to customers. Instead, the NPC was only allowed to recover the actual fuel consumption,” ERC Chairman and CEO Rodolfo B. Albano, Jr. said.

The actual fuel consumptions pertaining to NatGas are being recovered and adjusted through the Generation Rate Adjustment Mechanism (GRAM) which were charged to NPC’s customers starting 2004 when the GSPA application was granted provisional approval. Such tariffs will run until another application for recovery of the NatGas fuel costs is filed by NPC through the GRAM and approved by ERC. NatGas fuels had been integrated and charged in the fifth (5th) GRAM filing of the NPC and was carried on until the sixth (6th) and seventh (7th) GRAM. The 7th GRAM, which has a downward impact on electricity rates, would be enjoyed by consumers in the February to June 2007 billing periods.

The approval of the said GSPA promotes public interest in terms of sufficient and efficient power supply and in support of the government’s thrust to reduce the country’s reliance on imported fuel and provide alternative environment-friendly fuel for power generation.

The GSPA as approved by the ERC features, among others: (1) Specified quantity of NatGas purchased by NPC to be used for the generation of electricity in the Ilijan Natural Gas Combined Cycle Power Plant (located at Ilijan, Batangas);
(2) NPC’s annual and daily contracted capacity; (3) Sellers’ option to source the gas from another reservoir or through regasified Liquefied Natural Gas in cases of failure to deliver the contracted amount of gas due to early depletion of the reservoir; and (4) Sellers’ liability to pay or replace the fuel in case NPC opts to use an alternative fuel.

April 11 , 2007