Increased power rates in the offing

By Paul Anthony A. Isla, Business Mirror

Posted at Jul 25 2011 08:53 AM | Updated as of Jul 25 2011 11:53 PM

IMANILA, Philippines - The Energy Regulatory Commission (ERC) warned consumers to brace for an increase in power rates in the next three months.

Lawyer Francis Saturnino Juan, ERC executive director, hinted at this when he said the ERC will have to act upon the request of the Power Sector Assets and Liabilities Management Corp. (PSALM) for a provisional authority to collect within the next 75 days the universal charge for stranded contract costs and stranded debts of the National Power Corp.

PSALM submitted its petition to the ERC on June 28, Juan said.

He gave assurances that the ERC would not issue a provisional authority earlier than 30 days. “We can issue [the authority] 30 days from the filing [of its petition] but not beyond 75 days,” he added.

Juan said the ERC will be finalizing the schedule of public hearings for PSALM’s application and will notify all concerned parties of the schedule, once finalized.

Stranded contract costs refer to the excess of the contracted costs of electricity under Napocor’s eligible independent power producer contracts over the actual selling price of the contracted energy output of such contracts in the market. Stranded debts, meanwhile, refer to any unpaid financial obligations of Napocor that have yet to be liquidated by the proceeds from the sales and privatization of its assets.

In its petition, PSALM said it wanted to collect 39 centavos per kilowatt-hour (kWh) through the universal charge to recover the debts and costs incurred by Napocor over the years.

If approved, the universal charge will be an additional item in the electricity bill of consumers.

PSALM also proposed to the ERC that the stranded contract costs be recovered over 15 years instead of the four-year recovery period mandated in the ERC amended guidelines. The longer recovery period will bring down the charge connected with this to 6 centavos per kWh.

Energy Secretary Jose Rene Almendras said the government is doing everything it can to reduce the cost to be passed on to consumers, adding that the guidelines limit certain items, such as the stranded contract costs to be recovered at a shorter period of time.

Even if PSALM collects all of its receivables from the sale of Napocor’s generation assets and contracted capacity, Almendras said the proceeds would still be insufficient to pay off all of Napocor’s debts and contractual obligations.

He said what will be collected from consumers will be used to write off the debt that will be leftover.

“The challenge for PSALM is to try to sell the asset at the best possible price, as whatever they receive will be used to reduce the debts. But it can go either way. And if there is a decision not to sell certain assets, then, yes it can still increase. But the strategy is if we can sell some assets at a better value then that will be good for the Filipino,” Almendras said.