ERC grants NPC and PSALM provisional authority to implement the revised generation charges

The Energy Regulatory Commission (ERC) recently granted the National Power Corporation (NPC) and Power Sector Assets and Liabilities Management Corporation (PSALM) a provisional authority to implement the revised generation charges using the Long-Run Avoidable Cost (LRAC) methodology for the Luzon, Visayas and Panay/Bohol Grids.

For the Luzon Grid, the approved Annual LRAC Average Rate is PhP2.4717/kWh. For the Visayas and Panay/Bohol Grids, the LRAC shall be applied on a staggered basis in order to cushion the impact on the consumers. The LRAC Rates for the following billing cycle are as follows:

September 26 to December 25, 2003: PhP2.5752/kWh (Visayas), PhP2.6125/kWh (Panay/Bohol); December 26, 2003 to March 25, 2004: PhP2.6587/kWh (Visayas), PhP2.7332/kWh (Panay/Bohol); March 26 to June 25, 2004: PhP2.7421/kWh (Visayas), PhP2.8539/kWh (Panay/Bohol); June 26 to September 25, 2004: PhP2.8255/kWh (Visayas), PhP2.9745/kWh (Panay/Bohol).

In addition to the LRAC rates, NPC was also authorized to collect PhP0.0245 in Luzon and PhP0.0177 in Visayas and Panay/Bohol for the Franchise and Benefits to Host Communities pursuant to ERC Order dated September 20, 2002. Moreover, NPC was authorized to recover in full the remaining net Fuel and Power Cost Adjustment (FPCA) for the Visayas and provinces of Panay and Bohol within thirty-four (34) months equivalent to an estimated amount of PhP0.05/kWh.

Upon the effectivity of the approved rates based on LRAC methodology, the implementation of NPC’s Generation Rate Adjustment Mechanism (GRAM) and FOREX in the Luzon, Visayas and Panay/Bohol Grids is considered terminated. However, NPC is directed to file its last GRAM and Incremental Currency Exchange Rate Adjustment (ICERA) petition to recover the deferred generation charge and FOREX for the test periods February 2003 to September 2003.

In the Mindanao Grid, NPC and PSALM were directed to continue charging their existing rates, including the GRAM and ICERA.

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

In the formulation of the LRAC, the following components were considered: a) Weighted Average Cost of Capital (WACC); b) Capital costs associated with the construction of a plant; c) Fixed operating and maintenance costs; d) Variable operating and maintenance costs; e) Fuel costs; f) Insurance; and g) Peso-Dollar exchange rate.

The application of NPC and PSALM on the revised unbundled generation rate and methodology for the determination of generation rates is scheduled for initial hearing on November 10, 2003 at nine o’clock (9:00 A.M.) in the morning at the ERC Hearing Room, 15th Floor, Pacific Center building, San Miguel Avenue, Ortigas Center Pasig City. All interested parties who may wish to comment on or oppose the said application should file their comments and/or oppositions on or before the date of hearing. Copies of the application and its attachments shall be made available to interested parties upon request.

October 21 , 2003