ERC Grants Provisional Average Rate Increase of only 98 centavos per kWh

The Energy Regulatory Commission (ERC) has issued an order dated September 3, 2004 granting Provisional Authority to the National Power Corporation (NPC). The order authorizes NPC to increase its rates by an average of PhP 0.9798 per kWh as compared to the requested average increase of PhP 1.8700 per kWh, a reduction of 48%.

The new generation rates, which will become effective on September 26, 2004, differ for each grid. Luzon will see an increase of PhP 1.2318 per kWh while the Visayas will only see an increase of PhP 0.2202 per kWh and Mindanao an increase of PhP 0.2665 per kWh. For low consumption lifeline customers the impact will be offset by lifeline discounts of up to 50%.

Distribution Utilities which source all of their power from NPC will also have to raise their rates at the same time as NPC in order to pass these costs on to their customers. Other Distribution Utilities such as MERALCO will not be able to pass on the higher cost until an application under GRAM is filed and approved. No Distribution Utility will earn additional profits as a result of this order.

The reduction resulted mainly from corrections in the valuation methodology used for NPC’s rate base, annualization of Ancillary Service Revenue and exclusion of unsupported losses on foreign exchange fluctuations.

As Provisional Authority the rate relief is subject to refund should the final determination of rates be lower than those authorized in this order.

The ERC will continue to hold more public hearings to receive additional evidence from all interested parties before the issuance of its final order. It is the ERC’s hope that with the cooperation of all parties the final order can be issued by the end of this year.

NPC had requested that the ERC adopt Time of Use rates which are designed to charge customers different rates each hour of the day based on the cost of power actually generated during that hour. The ERC indicated that more data and additional analysis are needed before the Time of Use rate design proposed by NPC can be implemented for all NPC customers. However, pending this additional analysis, the adoption of time of use rates as provisionally designed by ERC can be on an optional basis.

Chairman Rodolfo B. Albano, Jr. said “The Commission is working hard to assure the public that the rates they pay for electricity reflect the true cost of providing such service and nothing more”.

September 4, 2004