PSALM, Napocor to file for new generation rates

The National Power Corp. (Napocor) and the Power Sector Assets and Liabilities Management Corp. (PSALM) will submit to the Energy Regulatory Commission (ERC) within this month a joint application for a new generation rate mechanism.

PSALM vice president Froilan Tampinco said the two firms are finalizing the application for the so-called time-of-use (TOU) tariff, which will allow them to charge generation fee based on the time electricity is used.

"We have already finished the simulations and matrix. We target to present the application to the PSALM board by April 15 and probably submit it to the ERC by April 21," Tampinco said.

The PSALM official said they have to firm up the new tariff mechanism before they could further dispose some of Napocor’s assets.

"Like in the case of Navotas I power plant, two of the three interested foreign firms have indicated that they will only bid if the TOU mechanism is already in place," he said.

PSALM has decided to defer the sale of Navotas I, which was originally scheduled to be bid out in the first quarter this year, to give way to the request of the potential bidders.

"We have to settle this issue first so we can be assured that these bidders will participate," he said.

The TOU is expected to replace the long-run avoidable cost (LRAC), the mechanism that was approved by ERC but was later recalled due to some complaints from consumer groups.

LRAC refers to the total operating cost of an efficient new plant in the Philippines. It is envisioned to promote efficiencies in capital cost management while ensuring that the electricity industry remain viable for the longer term.

In the formulation of the LRAC, the following components were considered: weighted average cost of capital (WACC); capital costs associated with the construction of a plant; fixed operating and maintenance costs; variable operating and maintenance costs; fuel costs; insurance; and peso-dollar exchange rate.

LRAC was also supposed to replace the controversial purchase power adjustment (PPA) which was renamed generation rate adjustment mechanism (GRAM).