PPA does not mean profits, assures ERC

The Energy Regulatory Commission (ERC) has assured the public that the cost adjustment mechanisms in the power rate will not mean additional profits for power distribution companies.

In a primer for public distribution, the ERB attests that "the purpose of the cost adjustment mechanisms is simply to recover increases in costs, and the formula approved for computing the same are so designed so as not to allow additional profit or income to the electric power utilities."

The cost adjustment mechanisms are – Purchased Power Adjustment (PPA), Fuel Cost Adjustment (FCA) and Currency Exchange Rate Adjustment (CERA).

Under the PPA, monthly power charges shall be "unbundled" or itemized so that consumers would know exactly how much they are paying for the components of their bill such as generation, transmission, distribution, and supply.

The FCA is an automatic adjustment in the cost of electric power produced by the government-owned National Power Corp. (Napocor) which was developed to incorporate changes in costs due to adjustments in the prices of fuel. The CERA is an automatic cost recovery formula intended to reflect adjustments in the amount of foreign loans when the Philippine peso depreciates vis-à-vis foreign currencies notably the US dollar.

The ERC stressed that the automatic cost adjustments "are not meant to increase or add to the profits of the electric power utilities."

The adjustments "do not, in any way, provide additional benefit to the utilities except as immediate means of recovering increases in principal amortization," the ERB added.

"All existing cost adjustment mechanisms were brought up for public consultation…the public will always be consulted before the ERC makes future decisions affecting power rate movement," the ERC said.

ERC chairperson Fe Garin has a standing invitation for the public to attend public hearings which afford consumers as well as utilities opportunities to present their respective views and concerns on the proposed power rate hikes. Schedules for the public hearings are normally published in major newspapers two weeks before the hearing date.