Natural gas law hurdles Senate

The Senate approved, on the third and final reading, a measure seeking to develop the natural gas industry to ensure energy security and more affordable prices for consumers by revitalizing indigenous gas explorations and developing liquified natural gas (LNG) infrastructures.

Senate Bill (SB) 2793 or Philippine Natural Gas Industry Development Act garnered 14 affirmative votes, three negative votes, and zero abstention during the plenary session.

Senator Pia Cayetano, the sponsor of the bill and the chairperson of the Senate Committee on Energy, said the passage of the measure aims to prioritize energy security and more affordable prices for consumers.

“This is a momentous step forward as we strive to achieve energy security and sustainable economic growth,” she said in her manifestation.

She further emphasized that natural gas serves as a crucial transition fuel towards renewable energy.

“We have to remember that natural gas is a transition fuel and our goal is to move to renewables. This means also protecting consumer welfare because, with the entry, we promote the encouragement of more investments in natural gas. We will have energy security that will be able to provide for more accessibility to natural gas and consumers will be able to benefit from this,” she explained.

Transparency provisions included

Cayetano assured the law also contains strong provisions for transparency and fair pricing, highlighting how indigenous gas has historically been more cost-effective than imported sources.

“This bill is good for the country, good for the environment and good for Filipino consumers,” she said.

Senator Raffy Tulfo likewise urged his fellow senators to consider the potential benefits of developing natural gas as well as to reflect on the policies pushing for the possible transition from coal to natural gas.

“It is difficult to rely on others. And we’ve been with other countries that are too dependent on foreign sources such as some of our neighbors in Southeast Asia,” he said.

Tulfo emphasized that the bill offers sufficient incentives for private entities to invest in the development of natural gas, ensuring the country’s independence from foreign sources.

Tulfo further explained that natural gas, with its inherent reliability and the technology available, offers stability against weather-related disruptions. He stated that the bill would help prevent sudden price fluctuations in the energy market, making energy more accessible and affordable for ordinary Filipino households, not just large businesses.

Opposing lawmakers

Among the lawmakers who voted against the passage of SB 2793 are Senate Minority Leader Aquilino “Koko” Pimentel III, Deputy Minority Leader Risa Hontiveros, and Senator Sherwin Gatchalian.

In explaining her vote, Hontiveros expressed concern that the bill could undermine the “least-cost” principle, which she sees as a crucial safeguard for Filipino consumers against unreasonable electricity prices.

“This departure from the least-cost principle of EPIRA — as a principle and procedural guide — pertains to fuel selection by the aggregator and generators, generator selection by distribution utilities, and dispatch of generators by the WESM, and is simply unacceptable,” she said.

Hontiveros said the measure puts the domestic natural gas sector under no pressure to match their selling price with what is available from regional and global markets.

Under the bill, she noted the Philippine energy sector would be required to purchase everything that the sector would produce, and even the most inefficient wells would be guaranteed a market.

“This abandonment of the ‘least cost’ principle may even affect, without categorically saying, the greatest potential of renewable energy to drive down electricity costs, especially when more and more investments are encouraged into this sector, rather than to another fossil industry which future is clearly defined in climate negotiations as a false solution and unsustainable,” she said.

Troubling provision

Hontiveros also opposed the “troubling” provision of the bill on cross-ownership after Senator Pia Cayetano, sponsor of the bill, rejected her suggestion to grant the Energy Regulatory Commission the authority to determine cross-ownership limits for LNG facilities.

Gatchalian expressed concerns about the provisions in the bill giving priority to indigenous natural gas over conventional sources of energy even if the latter offers a lower bid.

“This means that even if power from other conventional energy sources will have a lower bid in the wholesale electricity spot market than power from indigenous natural gas, the latter will still be prioritized. This will push up spot prices, thereby placing the burden of higher prices on consumers,” he added.

As mentioned by Hontiveros, Gatchalian also expressed concern over the absence of competitive bidding or price discovery mechanisms for the procurement of indigenous natural gas.

“Without this essential process, there is no concrete assurance that consumers will pay the lowest price, and investors will render the most efficient service,” he said.

‘This means that even if power from other conventional energy sources will have a lower bid in the wholesale electricity spot market than power from indigenous natural gas, the latter will still be prioritized. This will push up spot prices, thereby placing the burden of higher prices on consumers.’

Gatchalian said implementing the measure could lead to increases in electricity rates as consumers are required to buy electricity from gas power plants who are in turn required to buy indigenous gas.

“A mandated offtake for indigenous gas without competitive bidding or price discovery would allow indigenous gas suppliers to set prices without restriction, potentially resulting in higher costs passed on to consumers,” he added.

Under the measure, he also questioned the absence of competitive bidding or price discovery mechanisms for the procurement of indigenous natural gas.

“Our responsibility to the Filipino people is to protect their interests and to act as guardians of consumer welfare. For these reasons, and with the goal of ensuring a fair and balanced energy market that puts consumers first, I cast my no vote on this bill,” Gatchalian said.

Cayetano debunked the concerns raised by her colleagues, particularly on the possible additional cost to consumers.

“To be very, very clear, we have price mechanisms. We have transparency. The law is very clear about fair and open access. It’s not true that the price will not be disclosed. It’s not true that consumers will be forced to pay high prices. I’ve shown this on the chart many times to our fellow citizens and our colleagues, and historically, the price of indigenous gas has been extremely low,” she said.

“Let’s not scare our countrymen that electricity costs will increase if we prioritize indigenous gas. That’s not true,” she added.