Energy Pricing
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Energy Pricing
The company’s pricing practices in place are defined as follows:
The FSM Pricing Policy Framework (PPF) provides a mechanism to stabilize domestic prices and cushion the effect of international volatility. There are no cross subsidies within the PPF, and the prices reflect the costs of procuring, financing, storing, handling, and distribution of fuels in the jurisdictions that we operate.
The Nauru Pricing Template (NPT) negotiated with the Government of Nauru provides the mechanism to earn a return-on-investment commensurate with the risks of operating in Nauru. The NPT has a similar stabilization mechanism for domestic prices and cushions the effect of international volatility. A new Supply and Terminal Operating Agreement and NPT2 – second version – was negotiated as part of the international competitive bidding process.
An Energy Pricing Template (EPT) sets prices for electricity in our power plants that export to the electricity grid. The EPT comprises industry standard mechanisms such as capacity charges, maintenance allowances, and net electrical energy output based on a guaranteed minimum energy efficiency.
There are no cross subsidies between the PPF, NPT or EPT, and the prices in each operating unit reflect the costs of procuring, financing, storing, handling, and distribution of fuels, or generation of electricity in the States that we operate. The Corporation continues to benchmark domestic price competitiveness through comparison of pump prices of island neighbors.