First Gen seeking resolution on LNG cost recovery

MANILA, Philippines — First Gen Corp. of the Lopez Group is calling on power regulators to issue definitive guidelines for the recovery of its investments in the liquefied natural gas (LNG) business.

“It’s a painful transition because we end up absorbing these costs, but we hope there’s resolution because the LNG itself is needed,” First Gen president and COO Francis Giles Puno told reporters on the sidelines of an energy forum organized by media company Eco-Business.

Natural gas is seen as a suitable transition fuel due to its capability to supply baseload power while emitting a lower carbon footprint compared to coal.

First Gen defended its case with the Department of Energy and the Energy Regulatory Commission (ERC), but the decision on the matter remains pending.

“It’s a little strange when you have a project of national significance and then you cannot get the recovery. There’s somewhat inconsistency there,” Puno lamented.

In March, the ERC allowed the limited use of LNG as an alternative fuel supply source to run First Gen’s Santa Rita and San Lorenzo gas-fired power plants, but only in the case of a force majeure event.

The ruling was in response to an application seeking the ERC’s approval to pass on to consumers the recovery and payment of costs during testing, commissioning and other commercial operations of LNG facilities.

The commission argued that only landed costs are allowed to be recovered, as additional fixed costs require an amendment to power purchase agreements, subject to proper ERC approval in a separate application.

“We’re still optimistic that people will get to the table and agree that there’s a reasonableness in what we’re trying to do (and) what we’re seeking – which is again the recovery of the costs,” Puno said.

First Gen earlier pushed back the procurement of its fifth shipment of LNG while awaiting regulatory approvals for the recovery of costs associated with LNG operations.