Napocor to recover losses from contracts with IPPs

MANILA, Philippines - Consumers will have to brace for higher electricity costs starting next month after the Energy Regulatory Commission (ERC) allowed state-owned National Power Corp. (Napocor) to recover losses incurred from contracts with independent power producers (IPPs).

On Feb. 19, the ERC approved a universal charge of 19 centavos per kilowatt-hour, 47 percent lower than the 36-centavo per kWh sought by  Power Sector Assets and Liabilities Management Corp. (PSALM).

The 19-centavo universal charge will be passed on to consumers starting next month’s billing period and will continue until a universal charge is approved.

For typical residential consumers with monthly electricity consumption of 200 kWh, this translates to a P38.76-increase in electricity bills.

PSALM is mandated under the Electric Power Industry Reform Act of 2001 to calculate the amount of stranded contract costs of Napocor and to liquidate it.

In a petition filed in 2011, PSALM calculated Napocor’s stranded contract costs incurred from 2007 to 2010 at P74.298 billion.

The ERC said it rejected PSALM’s calculation of Napocor’s stranded contract costs “insofar as it failed to take into account the additional revenues to be realized by PSALM from the eligible contracts of Napocor with the IPPs under PSALM’s pending applications for adjustment in  generation rates pursuant to the Generation Rate Adjustment and Incremental Currency Exchange Rate Adjustment (GRAM and ICERA) mechanisms.”

“After a judicious review, the ERC approved only the amount of P53.581 billion for recovery from the universal charge,” the ERC said yesterday.

Napocor’s stranded contract cost refers to the excess of the contracted cost of electricity under the eligible contracts of Napocor with IPPs over the actual selling price of the contracted energy output of such contracts in the market.