ERC slates Rules on NPC's Stranded Costs Recovery for PubCon

The Energy Regulatory Commission (ERC) slated the public consultation on the draft Rules for Recovery of the National Power Corporation’s (NPC) Stranded Contract Costs and Stranded Debts Portion of the Universal Charge (UC) on 29 November 2006 at two o’clock in the afternoon (2:00 P.M.) at the ERC Hearing Room, 15th Floor, Pacific Center Building, San Miguel Ave., Pasig City.

“The draft rules will be brought to the attention of the public and the industry participants so that comments, suggestions and identification of issues can be gathered as part of due process,” ERC Chairman and CEO Rodolfo B. Albano, Jr. clarified. “These rules are highly significant in laying down the general framework of applications to be filed for ERC’s approval by the Power Assets and Liabilities Management (PSALM) for the recovery of the NPC Stranded Contract Costs and Debts portion of the UC,” the Chief Regulator added.

The subject rules aim to: (1) define the procedure and manner in which the PSALM should file for petitions regarding Stranded Contract Cost and Stranded Debts recovery through the UC; (2) define the parameters required to calculate the amount to be recovered; (3) outline the reportorial requirements relevant to the filing for the availment of the UC; and (4) develop a true-up mechanism that will determine the discrepancy between the actual disbursements and the approved share from the UC.

Sec. 32 of the Electric Power Industry Reform Act (EPIRA) defines NPC’s Stranded Contract Cost to be the excess of the contracted cost of electricity under eligible contracts with the Independent Power Producers (IPP) over the actual selling price of the contracted energy output. Stranded Debts of NPC, on the other hand, are the unpaid financial obligations of NPC which have not been liquidated by the proceeds from the sales and privatization of its assets.

Pursuant to the Electric Power Industry Reform Act (EPIRA), the ERC is mandated to verify the reasonable amounts of claims petitioned by the PSALM, including the manner and duration by which full recovery of the Stranded Costs and Debt of NPC is accomplished through the UC.

“The ERC encourages the public and the electric power industry participants to actively participate in the set consultation to assist the ERC in coming up with rules that will withstand any challenge that may crop up in the emerging competitive electricity market,” Chairman Albano urged.

November 29, 2006