ERC reduces NPC's rate adjustment

The Energy Regulatory Commission (ERC) directed the NPC (National Power Corporation) to reduce its effective rates after it provisionally approved NPC’s petitions for rate adjustments pertaining to the incremental fuel and Independent Power Producer (IPP) costs (commonly known as GRAM [Generation Rate Adjustment Mechanism]) and the foreign currency exchange rate fluctuations under the Incremental Currency Exchange Rate Adjustment (ICERA). The directives are contained in two (2) Orders dated 07 February 2007 issued under ERC Case Nos. 2006-072 RC and 2006-073 RC.

“NPC’s current effective rates will be reduced by PhP0.0430 for Luzon, PhP0.3151 for Visayas, and PhP0.0045 for Mindanao for the first month of implementation. The reductions were arrived at after a careful and thorough evaluation of NPC’s petitions,” ERC Chairman and CEO Rodolfo B. Albano, Jr. clarified. “The public had been expecting reduction in rates as the Philippine currency exchange rate gets better, however, the directive does not reflect yet said improvement for it covers earlier billing periods,” Chairman Albano added.

NPC’s provisionally approved rates will be effective starting February 26 to March 25, 2007 billing period. Beginning said billing period, NPC customers will be charged a lower rate until such period specified in said Orders.

Deferred fuel and IPP costs refer to the increase or decrease (movements) in the fuel and purchase power costs portion of the approved Generation Charges for Luzon, Visayas, and Mindanao Grids. On the other hand, deferred FOREX fluctuations costs are the changes in currency exchange. ICERA is the cost recovery adjustment mechanism for changes in the FOREX which should have no impact on the utility’s income. Both the deferred fuel and FOREX adjustments are allowed pass-through charges.

February 27, 2007