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ERC sets the Universal Charge for NPC’s Stranded Contract Costs

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In a Decision promulgated on 19 February 2013, the Energy Regulatory Commission (ERC) set the Universal Charge (UC) for the recovery of National Power Corporation’s (NPC) Stranded Contract Costs (SCC) at PhP0.1938/kWh, more than 17 centavos or 47% lower than the PhP0.3666/kWh proposal of the Power Sector Assets and Liabilities Management Corporation’s (PSALM), which is tasked under EPIRA to calculate the amount of stranded contracts costs of NPC and to liquidate the same.

In its petition docketed as ERC Case No. 2011-091 RC, PSALM calculated NPC’s stranded contract costs incurred for the period from 2007-2010 at PhP74.298 Billion. After a judicious review, the ERC approved only the amount of PhP53.581 Billion for recovery from the UC. The ERC rejected PSALM’s calculation of NPC’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 NPC with the Independent Power Producers (IPPs) under PSALM’s pending applications for adjustment in its generation rates pursuant to the Generation Rate Adjustment and Incremental Currency Exchange Rate Adjustment (GRAM and ICERA) mechanisms. The ERC also excluded revenue deductions made by PSALM, which effectively increased the stranded contact costs, by reason of its implementation of supply arrangements and discount programs like the Default Wholesale Supply (DWS), One Day Power Sales (ODPS) and Prompt Payment Discount (PPD).

The SCC refers to the excess of the contracted cost of electricity under the eligible contracts of NPC with IPPs over the actual selling price of the contracted energy output of such contracts in the market. The EPIRA mandates the ERC to determine and fix the UC for the payment of NPC’s SCC based on PSALM’s calculation thereof. Pursuant to this mandate, the ERC earlier issued its Amended Rules for the Recovery of NPC Stranded Contract Costs and Stranded Debts Portion of the Universal Charge, which incorporate the methodology to be used for calculating NPC’s SCC.

The approved UC-SCC of Php0.1938/kWh is effective starting the March 2013 billing period. All electricity consumers are liable to pay this charge to their respective distribution utilities or to the grid operator for the directly-connected customers, which in turn shall remit all their collections to PSALM, as administrator of the UC fund. For typical residential consumers with monthly electricity consumption of 200 kWh, this translates to an additional PhP38.76 in their electricity bill.

The UC-SCC of Php0.1938/kWh will be imposed until a new UC-SCC is determined by the ERC following the annual true – up application, which PSALM shall file on or before the 15th day of March each year for any excess or deficiency in the UC collections for setting NPC’s stranded contract costs.

Following the above Press Release of ERC through its website, NEA Project Supervisor/Acting General Manager, Mr. Sherwin C. Mañada, disclosed that the Universal Charges in the electric bill of ZAMCELCO member-consumers effective this billing cycle February 26-March 25, 2013 will now have three components, as follows:




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