Napocor and the Power Sector Assets & Liabilities Management Corp. (PSALM) are set to file the formal application for the refund as ordered by the Energy Regulatory Commission (ERC) tomorrow, Feb. 26.
Once approved by the ERC, the refund will be implemented by Napocor to its customers in the Luzon and Visayas grids over a period of two years beginning March 2004. These customers, which include distribution utilities and electric cooperatives, are in turn, expected to pass on the refund to their end-users.
The refund is in compliance with an ERC directive, issued last Jan. 26, 2004, for Napocor to refund to its customers some P2.9 billion that had been over-collected as a result of the implementation of the long-run avoidable cost (LRAC) mechanism in the Luzon and Visayas grids from October 2003 to January 2004.
The ERC, in an order dated Sept. 29, 2003, gave Napocor the provisional authority to collect an LRAC charge of P2.4717 per kwh in Luzon, P2.5752 per kwh in the Visayas, and P2.6125 per kwh in Panay/Bohol starting October 2003.
In its latest directive however, the ERC revoked this provisional authority and ordered Napocor to implement the refund.
In the same order, the ERC also directed Napocor to revert to collecting the generation rate adjustment mechanism (GRAM) – in lieu of the LRAC – for the billing months of October 2003 through January 2004.
These GRAM charges will be based on the GRAM rates approved by the ERC in its order dated May 15, 2003.
The GRAM refers to a deferred accounting procedure/adjustment mechanism approved by the ERC after Napocor unbundled its rates. Filed on a quarterly basis, the GRAM allows Napocor and distribution utilities to recover fluctuations in fuel prices and in the cost of power bought from independent power producers (IPPs).
Like the GRAM, the LRAC captures movements in fuel prices and other operational costs, but is designed to be effective for one year. GRAM replaced the purchased power adjustment (PPA) being charged by electric distribution utilities to its customers.