ERC approves 50¢/kwh Napocor rate hike

MANILA, Philippines - The Energy Regulatory Commission (ERC), the country’s power sector regulator, has allowed the National Power Corp. (Napocor) to raise its rates by 50 centavos per kilowatt-hour (kwh) starting this month.

The ERC’s decision was anchored on Napocor’s rate hike application to enable it to continue providing electricity to remote islands and inland barangays throughout the country.

In a three-page order, the ERC said that it is “cognizant of the fact that in the performance of its missionary electrification program, Napocor-Small Power Utilities Group (Napocor-SPUG) needs to ensure that it has efficient, continuous and reliable supply of power.

“It also has to secure sufficient fuel for power generation and incur additional fuel operating costs as a result of the fluctuating fuel prices and purchased power costs.”

As the missionary electrification arm of Napocor, SPUG operates 157 power plants with a combined capacity of almost 200 megawatts in far-flung islands that are not connected to any of the main grids.

SPUG’s recently approved rate hike falls under its 3rd Generation Rate Adjustment Mechanism (GRAM) petition to recover P2 billion from 2004 to 2005.

“Period covered is January 2005 to December 2005. The average rate adjustment prayed for is around P1.38 per kwh at two-year recovery period. Rates and amounts sought to be recovered are different for the different SPUG areas. The total amount of under recovery for the different SPUG areas is P2.065 billion,” ERC executive director Francis Saturnino Juan said.

Power rates in the SPUG areas are highly subsidized and result in significant losses for Napocor every year.

“Without a recovery mechanism to address these costs, Napocor’s financial condition will inevitably continue to deteriorate to the prejudice of its consumers,” the ERC said.

The ERC directive is expected to spell some relief for Napocor, which has been experiencing difficulty in sourcing the fuel requirements of its SPUG operations due to budget constraints.

Napocor’s fiscal flexibility has also been hampered by the transfer of Napocor plants and Napocor-IPP contract output to the Power Sector Assets and Liabilities Management Corp. (PSALM), which prevents Napocor’s remaining main grid operations from advancing funds to finance SPUG operations.

At the same time, a recent legal opinion of the Department of Justice has barred Napocor from engaging in further borrowings and in fund-raising activities like bond issuances.

The ERC order also comes on the heels of an appeal by the Association of Isolated Electric Cooperatives (AIEC) to Malacañang to help solve the looming power crisis in the SPUG areas, which it said will affect close to 700,000 rural households or roughly 3.2 million Filipinos.

In a letter to President Aquino dated Jan. 18, 2011, the AIEC, an organization of 39 electric cooperatives operating in SPUG areas, called on the government “to forestall this crisis by taking a direct and decisive action on this matter so as not to deprive 3.2 million Filipinos of the benefits of one of the basic necessities – electricity.”