(UPDATE) ERC: Napocor over-recovered P10B in costs
By Abigail L. Ho, Ronnel Domingo
Philippine Daily Inquirer
First Posted 22:14:00 05/09/2008
MANILA, Philippines--The National Power Corp. overcharged its customers P10 billion, representing over-recoveries, after the state-owned power generator failed to pass on to its customers the recovery of generation and forex-related costs since July 2006, the Energy Regulatory Commission said Friday.
In a show-cause order dated May 7, the ERC directed Napocor to explain why it failed to file applications for the generation rate adjustment mechanism (GRAM) and the incremental currency exchange rate adjustment (Icera) from July 2006 to March 2008.
ERC's approval of the applications for the recovery of an estimated P10 billion in generation and foreign exchange-related costs would have meant a rate reduction of around P0.20 per kilowatt hour for Napocor customers.
Napocor has been given 15 days from the receipt of the order to submit its explanation. It also has to justify why no administrative penalties should be imposed on it and why no criminal action instituted against its directors and officers for the violations.
Adjustment mechanisms
Because of the strengthening of the peso during the 21-month period, the ERC has estimated a deferred accounting adjustment of P10 billion.
According to ERC officer-in-charge Alejandro Z. Barin, this meant that Napocor overcharged its customers P10 billion in over-recoveries.
The GRAM is a quarterly adjustment mechanism that allows public utilities like Napocor to recover costs from fluctuations in the cost of fuel and of purchased power.
The Icera is a similar mechanism to recover costs related to fluctuations in the foreign exchange rate. A strong peso usually means a reduction in rates.
Before Napocor can pass on these charges, in the form of either a rate increase or decrease, it has to petition the ERC for approval.
But because Napocor did not file for the recovery of these costs during the 20-month period, the rates reflected on Napocor customers' bills were more than what they should have paid.
Violations
"Napocor's non-filing of its GRAM and Icera applications is a violation of Sections 5 of the implementing rules for the GRAM and Icera. The ERC hopes that Napocor will take expedient action on this matter to safeguard public interest," Barin said in a statement.
Utilities are required to file a deferred generation cost accounting application indicating their generation rate calculations as well as a currency exchange accounting application stating the calculation of the Icera.
Compliance
In a statement, Napocor said it would comply with the ERC's order and that it was actually in the process of submitting the required applications.
"We are just waiting for the approval [of the GRAM and Icera filings] from the Napocor board, [the firm's] governing body," it said.
It said it did not enjoy the P10 billion in over-recoveries that the ERC has estimated.
Napocor said what it was set to file with the ERC involved some refunds to be made to its customers representing savings in the GRAM and Icera.
According to Napocor data, the company's planned 9th GRAM application would seek for generation rate increases of P0.0133 per kWh for Luzon, P0.0599 for the Visayas and P0.4007 for Mindanao.
Rate decreases
Napocor also plans to file its 8th Icera application, seeking a decrease of P0.0207 per kWh for Luzon and increases of P0.0279 for the Visayas and P0.0165 for Mindanao.
A decrease means a discount or some form of refund that would be reflected in Napocor customers' bills.
Napocor said these GRAM and Icera figures--if the ERC approves the applications--would translate into decreases in Napocor rates of P0.4047 per kWh for Luzon customers and P0.0039 for Mindanao. But customers in the Visayas would pay an additional P0.1591.
As of April 2008, Napocor's effective rates stood at P3.8896 per kWh for Luzon, P2.8043 for the Visayas and P2.5523 for Mindanao.
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