ERC drafts rules for Napocor's automatic recovery scheme

The Energy Regulatory Commission (ERC) has drafted new rules for the proposed automatic monthly recovery of the National Power Corp.’s purchased power costs and incremental exchange rate adjustments.

The ERC said it will hold public consultations on the proposed rules in early January 2009.

The commission said the rules will ensure the timely recovery of allowable fuel and purchased costs of Napocor.

It said this will also enable the state-owned power firm to ensure transparent and reasonable prices of electric power service in a regime of free and fair competition and to achieve greater operations and economic efficiency.

According to the ERC, the new rules will also protect public interest as these affect the rates and services of Napocor.

The new rules on costs recovery, it said, will likewise help maintain the security, reliability and quality of electric power.

These proposed guidelines, however, will not apply to Napocor’s small power utilities group (SPUG), the ERC pointed out.

Under the current rules, Napocor is allowed to apply for the recovery of its costs every three months. 

Due to regulatory lags, it takes time for Napocor to recover costs, thus making its rates less competitive than the industry.

These “uncompetitive” rates are among the reasons being cited by some investors as one of the major obstacles in pouring in capital into the country’s power sector.

Citing the lower rates of Napocor, the sale of the Calaca power plant has been put on hold.

The winning bidder of Calaca, Suez Energy, said it wants the government to do something about the Napocor rates before it closes the deal.

The Power Sector Assets and Liabilities Management Corp., the entity created to handle the privatization of Napocor assets, has set November as its internal target in receiving the payment from Suez Energy.

The ERC has been asking PSALM to set a timeline for the financial close of the Calaca deal as this is part of conditions for the proposed interim open access scheme.