ERC mulls the adoption of automatic adjustment mechanisms for NPC
The Energy Regulatory Commission (ERC) unveiled on December 15, 2008 its draft Rules for the Automatic Recovery of the Fuel and Purchased Power Cost (PPC) and Foreign Exchange Related Costs of the NPC (National Power Corporation) and set it for public consultation on January 26, 2009 (Monday) at the ERC Hearing Room, 15th Floor, Pacific Center Bldg., San Miguel Avenue, Pasig City. The proposed Rules are available for download from the ERC website.
The
proposed Rules are intended to modify the existing Generation Rate Adjustment
Mechanism (GRAM) and the Incremental Currency Exchange Rate Adjustment (ICERA)
Mechanism, to allow the timely recovery or refund by NPC of any incremental
or downward adjustments in its fuel and purchased power costs, and foreign exchange
related costs, so as to minimize regulatory lags, make NPC's rates more reflective
of current economic conditions, and avoid the need to impose carrying charges
on any over or under-recoveries by NPC.
Under the present GRAM and ICERA guidelines of the ERC, NPC is allowed to implement adjustments to its generation charge to reflect changes in fuel and purchased power cost and foreign exchange-related costs only after review by the ERC. It is required to file its application for such adjustments on a quarterly basis. To compensate it for the delay in the recovery of any incremental costs, it is allowed to impose a carrying charge, which is ultimately passed on to the end-consumers.
With the proposed Rules, NPC will be able to automatically adjust its generation charge on a monthly basis, for the recovery or refund of any incremental or downward adjustments in its fuel and purchased power costs, and foreign exchange-related costs. In computing the adjustments, NPC will have to apply the ERC-approved formulas in the Rules, which contain variables, such as the total energy sales, base costs, the Mean of Platts Singapore (MOPS), Global coal physical index, U.S. Dollar to Philippine Peso rates published by the Bangko Sentral ng Pilipinas, and the Consumer Price Index (CPI), which can easily be verified based on public records, are provided by disinterested third parties, or are accurate indicators of NPC's costs.
To
prevent NPC from recovering more than what it is entitled to recover, the proposed
Rules also provide for a post-verification by the ERC of the adjustments implemented
by
NPC for at least every twelve (12) months by comparing the actual allowable
costs incurred versus the actual revenues for the same period generated by the
adjusted Generation Rates implemented by NPC.
December 22, 2008