Press Release
September 6, 2011

Probe urged on looming power rate hikes
Power rate hike 'shockers' don't jibe with spirit of EPIRA law

Sen. Ralph G. Recto yesterday said the impending series of power rate hikes do not jibe with the spirit and intent of the Electric Power Industry Reform Act (EPIRA) even as he called for a probe on its impact on power users already reeling from high prices of electricity and fuel.

Recto called on the Senate to check whether the separate power rate increase petitions lodged before the Energy Regulatory Commission (ERC) where in consonance to the EPIRA's paramount goal of ensuring reliable, cheap and secure supply of electricity.

"If these petitions fall through, every power users -- households and industries --would be bracing for multiple power rate whammies where the future electricity billing would display a jump of at least P5 for every kilowatt-hour used," Recto said.

The senator noted in Senate Resolution 586 that the Power Sector Assets and Liabilities Management Corp. (PSALM), National Power Corp (Napocor), power retailer Manila Electric Co. (Meralco) and the National Grid Corp of the Philippines (NGCP) have filed separate petitions for power rate increases before the ERC.

PSALM is seeking an increase of P0.1059 per kilowatt-hour (kwh) for Luzon and P0.1157/kwh for Visayas and also an adjustment in the universal charge (UC) by P0.39 kwh to recover a portion of the debts of the Napocor, of which P0.03 per kWh will be collected over 15 years to pay for stranded debts while P0.36 per kwh over four years for stranded contract costs.

The EPIRA defines stranded debts as any unpaid financial obligation of the Napocor that has not been liquidated by the proceeds from the privatization of the generating firm's assets. On the other hand, stranded contract costs are the excess of the contracted cost of electricity under eligible contracts over the actual selling price of the contracted energy output of these contracts in the market.

There's also a separate pending petition from PSALM, the agency tasked under EPIRA to oversee the liquidation of Napocor's assets to pay-off its debts and, in the process lower power rates, for the adjustment of Napocor's base rate under the Generation Rate Adjustment Mechanism (GRAM) and Incremental Currency Exchange Rate Adjustment (ICERA) where it seeks a hike of P4.72/kwh for Luzon, P4.26/kwh for Visayas and P3.17/kWh for Mindanao;

GRAM recovers the cost of fuel and of electricity purchased from privately owned power plants while the ICERA is a mechanism to recover the state power generator's foreign exchange fluctuation costs.

Meralco, for its part, has increased its generation charge effective on the August 2011 billing period at P0.08 per kilowatt-hour as a result of higher cost of power from the spot market and power producers. The same power retailer just got a green light from the ERC to impose another 3.06 centavos/kwh for its under-recoveries during the period of January 26 to February 25 in 2010 amounting to P944 million.

The NGCP, meanwhile, has proposed to the ERC a total rate increase of P0.82/kWh that will be staggered from October 2011 up to December 2015 in Luzon to recoup the P80.2 Million used for the rehabilitation, repair and restoration of transmission line facilities damaged by typhoons Basyang and Juan in 2010.

Recto said, surely, the looming 'power rate shockers' would further validate the country's reputation as having the highest power rates not only in Asia but also in the whole world with electricity costing P11 per kwh.

"These petitions for electricity rate adjustments will be passed on to power end-users and hence, will be a disincentive to the country's investors and unnecessarily burden the consumers of electric power who are currently faced with high cost of living," Recto, chair of the Senate ways and means panel, said.

Recto said an investigation of the Senate on the power rate increase petitions would "energize the chamber with volts of ideas on whether EPIRA suffered a major tripping or a short circuit on its way to implementation."

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