Napocor expects losses to ease

MANILA, Philippines –  State-owned National Power Corp. (Napocor) expects its financial losses to ease as the Energy Regulatory Commission (ERC) approved an increase in the rates being charged on Napocor’s Small Power Utilities Group (SPUG).

Power rates in the SPUG areas are highly-subsidized and result in significant losses for Napocor. In 2007, Napocor incurred a net loss of P136 billion and will likely remain in the red this year.

“The ERC directive is expected to spell some financial relief for Napocor, which has been experiencing difficulty in procuring the fuel requirements of its SPUG plants brought about by ERC’s final decision to reduce the universal charge for missionary electrification (UCME) effective September last year,” Napocor said.

From 9.78 centavos per kilowatthour (kwh) under its provisional authority, the ERC reduced the UCME to 4.53 centavos per kwh.

It would also be noted that a recent legal opinion of the Department of Justice has barred Napocor from engaging in further borrowings and in fund-raising activities like bond issuances. This has effectively prevented Napocor from bridge-financing any funding shortfall in its missionary electrification operations.

The ERC allowed Napocor to raise its rates in the off-grid areas being serviced by the SPUG in a bid to prevent the disruption of electricity supply to these remote islands and inland barangays.

In a three-page order issued Jan. 31, the ERC authorized Napocor to adjust its rates by 94.92 centavos per kwh in the SPUG areas in Luzon beginning on its January 2011 billing period.

An adjustment of P1.1950 per kwh was also approved by the ERC in the SPUG-Visayas areas, while an increase of P1.4680 per kwh was authorized for the SPUG areas in Mindanao.

The ERC order supersedes the provisional authority it issued last Jan. 24, 2011 which authorized Napocor to implement a 50-centavo per kwh across-the-board rate adjustment in all SPUG areas.

Shortly after the ERC issued its first order, Napocor-SPUG filed a motion to allow the recovery of an additional deferred accounting adjustment (DAA) amounting to P4.835 per kwh, on the grounds that the 50-centavo adjustment initially granted was not enough for Napocor to even sustain the operations of existing facilities in the SPUG areas.

In its latest order, the ERC said that “a thorough review of the documents submitted by Napocor-SPUG revealed that there is indeed a need to increase its DAA to enable it to meet its fuel requirements and ensure that there is efficient, continuous and reliable supply of power within the SPUG areas”.

As the missionary electrification arm of Napocor, SPUG operates 242 power plants with a combined capacity of almost 200 megawatts in far-flung islands that are not connected to any of the main grids in Luzon, Visayas and Mindanao.