ERC rejects rate hike for Napocor

The Energy Regulatory Commission (ERC) yesterday junked the petition of the National Power Corp. (Napocor) to increase its basic generation charge by 36.85 centavos per kilowatthour (kWh) in the Luzon grid.

The power sector regulator said Napocor failed to provide substantial evidence to support its rate hike application.

“The ERC gave no probative value to Napocor’s submissions in support of its application, which the regulator found not to be reflective of its current costs,” ERC chairperson Zenaida Ducut said.

“As an independent, quasi-judicial body, the ERC is duty bound to decide the cases filed before it on the basis only of substantial evidence. Whether or not Napocor is entitled to any increase ultimately depends on what evidence it will submit to the ERC. If it submits none that can be given any probative value, as what it did in this case, then the dismissal of its application is a foregone conclusion,” the ERC chief said.

ERC executive director Francis Saturnino Juan said they did not find any reason for Napocor to have a basic rate adjustment, notwithstanding the impact on the investor’s plea for Napocor’s rate to be adjusted.

“It is up to Napocor, it can always file another application if it wants to. We cannot speculate on how the investors will view the recent decision. We are just doing our job in accordance with the Electric Power Industry Reform Act and other laws. As far as Napocor’s rate application is concerned, the Commission had no choice but to dismiss because of insufficiency of evidence,” Juan added.

The winning bidder of the Calaca power plant, Suez Energy, had expressed deep concern over the artificially low rate of Napocor.

The Calaca plant was bidded out on Oct. 16, 2007, with the consortium of Calaca Holdco Inc. (CHI) of Suez group emerging as the highest bidder at $786.53 million. 

Under the Power Sector Assets and Liabilities Management Corporation (PSALM) bidding rules, the winning bidder should come up with a 40 percent upfront payment 270 days after the contract of effectivity is served to the buyer.

Up to now, the sale has not been finalized due to the rate issues.

Meanwhile, ERC said electricity rates will increase this month by 18 centavos per kWh, with the implementation of the approved 9th generation rate adjustment mechanism (GRAM) and 8th incremental currency exchange rate adjustment (ICERA) of Napocor. 

The increase will be reflected in the December billing cycle of distribution utilities but will be felt by end-consumers in January 2009.

Under Republic Act 9136 or the Electric Power Industry Reform Act, Napocor is mandated to apply quarterly for GRAM and ICERA, as well as the adjustment of basic generation rate as a result of the privatization of its generation assets.

The GRAM and ICERA are ERC approved adjustment mechanisms that cover a utility’s expenses for purchased power, fuel costs and fluctuations in the foreign exchange rate.

They are revenue neutral, which means that Napocor does not earn any additional revenues from their implementation.

The state-owned power firm filed for adjustments in the GRAM and ICERA, which are components of Deferred Accounting Adjustments (DAAs) in its power rates, as required by the ERC.

ERC explained that Napocor’s generation rate would have been 74.31 centavos per kWh higher than what it is now because it is about to complete its implementation in the December 2008 billing cycle rate reduction under the 9th GRAM and 8th ICERA.

This was, however, averted by ERC’s decision to provisionally approve a 56-centavo rate reduction for Napocor’s time-of-use rates for Luzon.

The 56-centavo per kWh reduction provisionally ordered by ERC covers the fluctuations in Napocor’s costs from January 2007 to June 2008.  

It is effective from its December billing cycle, which means that the electricity end-users will feel its effect only in January 2009.

For electricity consumers connected to distribution utilities sourcing 100 percent of their requirements from Napocor, its impact is 18.31 centavos per kWh, a difference between the 74.31 per kWh reduction last approved for Napocor and the 56 centavos per kWh reduction, which Napocor will start implementing this month.

“Had the ERC granted what Napocor asked for in its pending GRAM and ICERA applications, there would have been an increase from the present level by as much as 71 centavos. For the sake of our consumers, but without depriving Napocor of its right to recover its just and reasonable costs, such impact had to be mitigated,” Ducut said.