"In order to cope up with the rules, we need to decide if we will be granting the Napocor petition for a PA. We have until September 5 to come up with a resolution. But it could be earlier than September 5," ERC chairman Rodolfo Albano Jr. said.
Albano said they have already started the public hearing on Napocor’s petition to increase its generation rate by P1.87 per kilowatthour (kWh).
According to Albano, ERC will be conducting a series of public hearing in Cagayan de Oro and Cebu this week.
So far, he said the commission has heard the testimonies of some senior officials of Napocor and Power Sector Assets and Liabilities Management Corp. (PSALM) on the rate hike application.
"They presented simulations and showed the significance of raising their power rates. They said Napocor needs to recoup some losses from its operation and the rate increase will encourage foreign investors to invest in the privatization of Napocor," he said.
At the same time, Albano said they will look into the resolution of the Napocor board on the lifting of the 40 centavos cap on the company’s purchased power cost adjustment (PPCA).
"We will study carefully if we will have to affirm the Napocor board resolution on the PPCA. We need to look at the implications of lifting the cap," Albano said.
PPCA is the automatic cost recovery scheme that allows Napocor to pass on to customers costs associated with foreign-currency denominated obligations under its existing contracts with independent power producers.
This recovery mechanism allows Napocor to pass on to its customers including the Manila Electric Co. (Meralco) which in turn pass it on to electricity end-users through the so-called purchased power adjustment (PPA).
The imposition of the PPCA cap has resulted to huge losses on the part of Napocor and created "artificial rates" which discourage foreign investors from pouring in much-needed capital in the power sector.