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Napocor's automatic rate hikes to leave consumers unprotected


A decision allowing the National Power Corp. (Napocor) to "automatically" increase rates will be subject to abuse, leaving consumers "unprotected," two organizations said on Friday. Napocor, which sells electricity to the Manila Electric Co. (Meralco), will be able to recover its costs "even without verification," Pete Ilagan, president of the National Association of Electricity Consumers for Reform (Nasecore) told GMANews.TV. Last August 3, the Energy Regulatory Commission (ERC) allowed Napocor, the Philippines' largest power producer, to automatically impose rate adjustments. The decision also leaves consumers "unprotected," Ilagan added. FDC's secretary general Milo Tanchuling said that the ERC was "careless" in issuing the resolution because any increase in prices given current economic conditions is "untimely." In a separate interview, Tanchuling told GMANews.TV that consumers should now brace for a monthly hike in their electricity bills now that Napocor has been given the authority to impose fuel and foreign exchange prices. Under the new issuance, Napocor can automatically increase or lower its generation rate by October depending on fuel costs and the foreign exchange rate between the Philippine peso and the US dollar. Previously, Napocor's rate hike petitions were evaluated under the Generation Rate Adjustment Mechanism (GRAM) and the Incremental Currency Exchange Rate Adjustment (Icera), which are reviewed every three months by the ERC. GRAM allows power plants to collect higher fees whenever fuel costs rise while the Icera increases electricity costs whenever the peso weakens. Electricity prices are sensitive to the costs of fuel and the value of the peso against the dollar. Since diesel and bunker fuel are used in some power plants, any rise in crude prices translate into higher electricity costs. In the meantime, most of the Philippines' oil requirements are imported and are paid for in US dollars. A stronger dollar makes oil more expensive. However, the new mechanism "works both ways," ERC executive director Francis Juan told GMANews.TV. Napocor will not just reflect the price hike but it is also "obliged to [reflect price reduction] immediately and then wait for the ERC to approve the petition," Juan said. Automatic rate adjustments would also eliminate confusion that consumers experience whenever confronted with the mismatch among fuel prices and foreign exchange volatility, Juan added. Automatic adjustments would also be verified annually, Juan said. Both Ilagan and Tanchuling expressed doubts that the ERC could review the adjustments properly. By the time consumers file a petition against the price hike, the adjustment would already have taken effect, obliging the public to pay for higher prices by the time ERC decides on the complaint, Ilagan said. Tanchuling said that by giving Napocor such authority, the ERC virtually "washed its hands off" its obligation to ensure against abuse by power producers. "It's as if the ERC abandoned its duty of regulating power prices," Tanchuling said. - GMANews.TV

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