Power rate hike questioned
Business World, Wednesday, January 5, 2005
By Ma. ELISA P. OSORIO and BERNARDETTE S. STO. DOMINGO, Reporters
A consumer group is questioning in court regulators' approvals late last year of an almost P1 per kilowatthour increase in the electricity price of state-run National Power Corporation (Napocor).
National Association of Electricity Consumers for Reforms (Nasecore) asked the Court of Appeals to void the September and November decisions of the Energy Regulatory Commission because the rate rise was unjustified.
It claimed that Napocor's method of computing the price increase of 97.98 centavos per kilowatthour did not meet international standards.
"Using the average US dollar versus Philippine peso exchange rate as the method of asset valuation is not sanctioned or approved by the International Valuation Standards Committee," the 14-page petition said.
Nasecor said Napocor should first prove that this valuation method was internationally sanctioned.
The Energy Regulatory Commission said earlier the foreign exchange indexation methodolog used by Napocor was "acceptable and reasonable"
Foreign exchange indexation is not among the alternative valuation methods endorsed by the International Valuation Standards Committee, which are cost approach, sales comparison approach, and income capitalization approach.
Nasecore also opposed the Time-of Use Pricing scheme pushed by Napocor, which it claimed did not benefit consumers that could not shift power demand to off-peak periods.
With the scheme, electricity prices during peak periods are extremely high compared to off-peak periods.
Nasecore noted that even regulators themselves earlier rejected the scheme because it was "not likely to replicate the portfolio available to customers in a competitive environment."
But energy regulators laters reversed themselves on the issue.
Nasecore also wants power companies to charge the true cost of generated electricity before asking for any rate increase.
RULES
At the same time, the Energy Regulatory Commission (ERC) is now preparing rules that may allow electric companies to automatically charge their customers more everytime the cost of "transmission" or delivery of electricity will go up.
However, the additional charge will not necessarily go to the electric companies themselves but to state-run National Transmission Corp. (Transco), the government-owned company that owns and operates transmission towers and lines nationwide that deliver electricity from one area to another.
ERC Chairman Rodolfo B. Albano said his office was just waiting for comments and suggestions from the industry. Public consultation will follow.
"We have posted it [proposal] on the website to get more information. After public hearing and consultation, we will issue the guidelines," he told BusinessWorld.
In separate interviews, industry sources said they urged regulators to cosider the transmission rate adjustment mechanism or TRAM.
"We heard ERCis already finalizing the guidelines," one source said.
TRAM is similar to the defunct generation rate adjustment mechanism or GRAM, which had allowed electric utilities to recover fluctuations in fuel prices and in the cost of electricity bought from state-run National Power Corp. as well as private generators.
An industry source noted there was no mechanism that allowed for the recovery of changes in transmission prices.
He said the National Transmission Corp. fixed transmission rates based on a utility's load factor -- its average load as a percentage of its peak load. But load factor is not within a utility's control, and if it goes down or up, under-recovery or over-recovery ocurrs.
"There must be a way to correct that. That is something the regulators completely forgot. That is their first flaw. Also rate levels can go up and if they do, there is no mechanism for recovery of costs. ERC should be the one to fix this," the source added.
Last October ERC scrapped GRAM and allowed utilities to automatically raise prices without prior approval, to reflect fluctuations in generation costs due to movements in fuel prices and the exchange rate.
Mr. Albano had said that without GRAM, National Power Corp. and distribution utilities could automatically raise prices but would have to justify them. "Ten days before every month, they should have estimates of power costs. They should file a report before their implementation, but they don't need to wait for approval from the ERC," Mr. Albano had said.
By Ma. ELISA P. OSORIO and BERNARDETTE S. STO. DOMINGO, Reporters
A consumer group is questioning in court regulators' approvals late last year of an almost P1 per kilowatthour increase in the electricity price of state-run National Power Corporation (Napocor).
National Association of Electricity Consumers for Reforms (Nasecore) asked the Court of Appeals to void the September and November decisions of the Energy Regulatory Commission because the rate rise was unjustified.
It claimed that Napocor's method of computing the price increase of 97.98 centavos per kilowatthour did not meet international standards.
"Using the average US dollar versus Philippine peso exchange rate as the method of asset valuation is not sanctioned or approved by the International Valuation Standards Committee," the 14-page petition said.
Nasecor said Napocor should first prove that this valuation method was internationally sanctioned.
The Energy Regulatory Commission said earlier the foreign exchange indexation methodolog used by Napocor was "acceptable and reasonable"
Foreign exchange indexation is not among the alternative valuation methods endorsed by the International Valuation Standards Committee, which are cost approach, sales comparison approach, and income capitalization approach.
Nasecore also opposed the Time-of Use Pricing scheme pushed by Napocor, which it claimed did not benefit consumers that could not shift power demand to off-peak periods.
With the scheme, electricity prices during peak periods are extremely high compared to off-peak periods.
Nasecore noted that even regulators themselves earlier rejected the scheme because it was "not likely to replicate the portfolio available to customers in a competitive environment."
But energy regulators laters reversed themselves on the issue.
Nasecore also wants power companies to charge the true cost of generated electricity before asking for any rate increase.
RULES
At the same time, the Energy Regulatory Commission (ERC) is now preparing rules that may allow electric companies to automatically charge their customers more everytime the cost of "transmission" or delivery of electricity will go up.
However, the additional charge will not necessarily go to the electric companies themselves but to state-run National Transmission Corp. (Transco), the government-owned company that owns and operates transmission towers and lines nationwide that deliver electricity from one area to another.
ERC Chairman Rodolfo B. Albano said his office was just waiting for comments and suggestions from the industry. Public consultation will follow.
"We have posted it [proposal] on the website to get more information. After public hearing and consultation, we will issue the guidelines," he told BusinessWorld.
In separate interviews, industry sources said they urged regulators to cosider the transmission rate adjustment mechanism or TRAM.
"We heard ERCis already finalizing the guidelines," one source said.
TRAM is similar to the defunct generation rate adjustment mechanism or GRAM, which had allowed electric utilities to recover fluctuations in fuel prices and in the cost of electricity bought from state-run National Power Corp. as well as private generators.
An industry source noted there was no mechanism that allowed for the recovery of changes in transmission prices.
He said the National Transmission Corp. fixed transmission rates based on a utility's load factor -- its average load as a percentage of its peak load. But load factor is not within a utility's control, and if it goes down or up, under-recovery or over-recovery ocurrs.
"There must be a way to correct that. That is something the regulators completely forgot. That is their first flaw. Also rate levels can go up and if they do, there is no mechanism for recovery of costs. ERC should be the one to fix this," the source added.
Last October ERC scrapped GRAM and allowed utilities to automatically raise prices without prior approval, to reflect fluctuations in generation costs due to movements in fuel prices and the exchange rate.
Mr. Albano had said that without GRAM, National Power Corp. and distribution utilities could automatically raise prices but would have to justify them. "Ten days before every month, they should have estimates of power costs. They should file a report before their implementation, but they don't need to wait for approval from the ERC," Mr. Albano had said.
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