ERC clarifies perceived electricity rate increase
The Energy Regulatory Commission (ERC) clarified that the impending adjustment in power rates to be effected by September 2006 is merely a recovery of the National Power Corporation’s (NPC’s) adjusted cost in generation, due to changes in price of fuel and the foreign exchange incurred in servicing its loans. “Those are mere adjustments in the cost of power, which may either be upward or downward, as the case may be, that the NPC is authorized to recover or return to its customers and should not be mistaken as rate increases, ” ERC Chairman Rodolfo B. Albano, Jr. emphasized.
The Implementing Rules for the Recovery of Fuel and Independent Power Producer Costs Generation Rate Adjustment Mechanism (GRAM) and Incremental Currency Exchange Rate Adjustment (ICERA) issued by the ERC on 24 February 2003 allow the recovery of eligible costs from NPC’s customers, particularly the costs associated to produce electricity and the monetary advances to defray the cost of foreign currency exchanges adjustments.
“Although the impact of said recovery schemes, for this particular case is an upward adjustment, it should not be viewed as a ‘rate increase’ per se. ‘Rate increase’ applications require publications and are subjected to public hearings. The ‘recovery mechanisms’, on the other hand, such as the GRAM and ICERA, also known as ‘Escalation Clauses’ are mere true-up schemes designed to update charges that are being affected by certain factors and circumstances such as fuel prices and exchange rate volatility. The power utilities should have no gain nor loss in the implementation of the said mechanisms, as they should only recover the actual amount due them.” Chairman Albano added.
The existing policy of the ERC allows the recovery of GRAM and ICERA charges only after its thorough review. “Rest assured that the ERC will always be guided by its mission of promoting and protecting the long-term interests of consumers in terms of quality, reliability and reasonable pricing of a sustainable supply of electricity, “ Chairman Albano stressed.
August 4, 2006