ERC clarifies reports of a power rate increase in Luzon
The Energy Regulatory Commission (ERC) issued a clarification on the impending increase in power rates in Luzon which was reported to be PhP 0.99 per kilowatt-hour (kWh) by some major dailies on July 17, 2006. The Order pertaining to the 6th Generation Rate Adjustment Mechanism (GRAM) and the 5th Incremental Currency Exchange Rate Adjustment (ICERA) applications of the National Power Corporation (NPC), which the ERC approved, only grants a PhP 0.0110/kWh additional recovery for GRAM and PhP 0.3687/kWh for ICERA from Luzon customers.
The GRAM and ICERA adjustments totalling to PhP 0.3797/kWh are way below the PhP 0.99/kWh as reported in some newspapers. Prior to the latest GRAM and ICERA adjustments, the ERC issued an Order for the recovery of costs to be collected from customers through Deferred Accounting Adjustments (DAA) under the 5th GRAM and 4th ICERA filings of NPC. In determining the increment for the Luzon power rates, the news reports erroneously summed up the 6th GRAM and the 5th ICERA recoveries which are already inclusive of the 5th and 4th GRAM and ICERA recoveries, respectively.
The DAA for the 5th and 6th GRAM overlapped because of overlapping recovery periods. The same is true with the ICERA where the DAA for the 4th and 5th Order also overlapped. The new GRAM for Luzon will be recovered for a period of nine (9) months while the ICERA will be two-fold: the Debt Service and OPEX component will be for eight (8) months whereas the Capacity and Infrastructure Fee component will be for twenty-four (24) months. The 6th GRAM and the 5th ICERA new rates will remain to be in effect unless the ERC subsequently approves the recovery of the deferred charges of NPC.
GRAM is a pass-on revenue-neutral charge allowed by the ERC for the NPC to recover from the end-consumer the costs it incurred to produce electricity. The costs include fuel and power purchases from independent power producers. ICERA, on the other hand, represents the recoveries that must be made by the NPC from customers for money it advanced to defray the cost of foreign currency exchanges adjustments resulting from fluctuations in the exchange rate.
“The ERC requests media to exercise care in reporting rate adjustments. The electricity consumers can become restive on announcements that are premature and unverified,” ERC Chairman B. Albano, Jr. said.
The existing policy of the ERC only allows the recovery of GRAM and ICERA charges after its thorough review.
July 20, 2006