ERC allows Napocor to increase generation fees

MANILA, Philippines - Electricity costs will rise nationwide as regulators, citing an "immediate need to alleviate" National Power Corp.’s (Napocor) "financial difficulties", provisionally allowed significant adjustments to the state-owned firm’s basic charges. The Energy Regulatory Commission (ERC) decision, finalized last February 16 but released only Thursday, increased Napocor’s basic charge by an average of 46.82 centavos per kwh for Luzon, by P1.1460 for the Visayas, and by 71.47 centavos for Mindanao. It would be the first such increase since 2004 and in percentage terms means a 12% hike for Luzon and an even higher 39.7% and 34%, respectively, for the Visayas and Mindanao grids. For customers of Manila Electric Co. (Meralco), the country’s largest power distributor, the decision means paying 17 centavos per kWh more starting April. The Lopez-led firm, which services Metro Manila and nearby provinces, said a five-member Luzon household using an average of 200 kWh monthly would have to pay an extra P34. The Bangko Sentral ng Pilipinas (BSP) said the power rate hike was already factored into its 6-8% inflation forecast for the year. Inflation hit a 10-year high of 9.3% in 2008. "We already recognized that it is one of the upside risks," BSP deputy governor Diwa C. Guinigundo told reporters Thursday. Philippine power rates are among the highest in Asia and are a politically sensitive issue because of their impact on the poor. Napocor is expected to post a net loss in 2008 after three years of profitability, reflecting foreign exchange losses and higher fuel costs. The ERC, on its website, said Napocor’ financial difficulties had been brought about by "current costs of generating power, including the costs of the discounts that it is mandated to extend to certain customers." Napocor welcomed the ERC decision, but said it would seek a reconsideration and wanted its original, and much higher rate increase application, ultimately approved. "There will still be public hearings to be conducted on our rate application, and we hope to present our case, not only before the ERC, but also to the public," the company said in a statement. On January 16 the power generator and a co-applicant, Power Sector Assets and Liabilities Management Corp., proposed an 83.32 centavos per kWh increase for Luzon, almost double what the ERC granted this week. For the Visayas, Napocor wanted to charge P1.3815 per kWh more, and an additional P1.0686 for Mindanao. Based on the provisional authority, Napocor’s basic charges will now be P4.3684 per kWh for Luzon, P4.0339 for the Visayas, and P2.8177 per kWh for Mindanao. "The ERC’s mandate is to set the rates at such levels that will allow [the] recovery of just and reasonable costs in the provision of the service and a reasonable return on the capital employed in the business subject to regulation," ERC Executive Director Francis Saturnino C. Juan said in a statement. "[It] cannot shirk this responsibility [even] if it becomes difficult and unpopular to do so." Explaining its refusal not to grant the higher rates sought, the commission said it had disallowed some cost items, including those that relate to state power plants already auctioned off, as well as power sales in the wholesale electricity spot market. The commission said the final rates could change depending on the outcome of upcoming hearings. For Luzon these will be on February 24 and March 3, 9, and 16. Consultations in Mindanao will be held on Feb. 25 and 26, and on March 19 and 20 in the Visayas. Napocor and PSALM originally filed the rate increase application last June but saw it thrown out by the ERC. Regulators said the figures presented, which were based on 2002 and 2004 data, did not reflect current costs. For Meralco, meanwhile, its corresponding rate hike will take effect in the billing cycle starting February 26 but won’t be reflected in customers’ statements until April, Vice-President Ivanna G. dela Peña said in a text message. She said the net increase for Meralco residential clients would be a little over a third of the Napocor hike since the utility obtains only 36% of its power requirements from the state-owned firm. The rate increase for business clients, said Ms. dela Peña, will depend on their power consumption. - BusinessWorld