Napocor pushes for higher rates

Consumers are likely to bear the brunt of increased electricity rates once the Energy Regulatory Commission (ERC) approves the National Power Corp.’s motion for reconsideration seeking to increase power rate charges to the Luzon, Visayas and Mindanao power grids.

In its motion, Napocor proposed a revised generation rate schedule as follows: P3.0075 per kilowatthour (kwh) for Luzon; P2.3465 per kwh for Visayas, and P1.4546 per kwh in Mindanao.

These rates are higher than the ERC-approved generation rate schedule last May 19 of P2.1258 per kwh, P2.2412 per kwh, and P1.0262 per kwh for Luzon, Visayas and Mindanao, respectively.

"The revised Napocor generation rate schedule fails to take into account legitimate costs incurred by Napocor which would inevitably endanger security of supply and ultimately lead to higher electricity prices to the detriment of end-users," Napocor’s legal counsels led by its vice-president for legal affairs Rainier B. Butalid said.

The ERC issued last May 19 the new generation charges based on the adoption of the generation rate adjustment mechanism (GRAM) and incremental currency exchange recovery adjustment (ICERA), but Napocor refused to implement the rates, saying the charges will not allow the state-run power firm to recover legitimate costs of generation.

At the same time, it effectively increases Napocor’s deficits that would lead to instability in power supply.

Napocor also said the setting of generation rates at "inordinately low levels" without considering the true, reasonable and realistic costs runs counter to the privatization efforts in the electricity industry.

Napocor cited other reasons for objecting to ERC’s order and justified its proposed new rate charges.

The power firm warned that the setting of unrealistic rates by the ERC will discourage the private sector from acquiring any of Napocor’s plants, or from putting up additional generation facilities as the rates do not provide for reasonable return on investment.

Napocor added this also consequently distorts pricing in the sector, making other interested investors unable to compete with the power firm’s rates, contrary to the intent of the Electric Power Industry Restructuring Act.