Napocor rate hike in off-grid areas OK’d

MANILA, Philippines – State-run National Power Corp. has been given the green light to increase the effective power rates in the off-grid areas across the country to recover some P2.3 billion in fuel and foreign exchange costs incurred by its Small Power Utilities Group.

In two separate decisions, the Energy Regulatory Commission allowed Napocor to hike electricity rates in Luzon by a total of 94.92 centavos per kilowatt-hour; P1.1950 per kWh in Visayas; and P1.4680 per kWh in Mindanao.

These increases represented the third installments of the both the Generation Rate Adjustment Mechanism (GRAM) and the Incremental Currency Exchange Rate Adjustment (Icera), covering a 12-month period from Dec. 26, 2004 to Dec. 25, 2005.

GRAM is a mechanism that allows utilities such as Napocor to recover costs associated with fuel and purchased power, while the Icera allows utilities to recover foreign exchange-related costs. These mechanisms are consistent with the principles of free and competitive electricity market as provided under the Electric Power Industry Reform Act (Epira).

The Napocor-SPUG, the state generator’s missionary electrification arm that provides electricity to remote islands and far-flung communities, was allowed to recover the P341 million (equivalent to 39.07 centavos per kWh across the country) from the third Icera installment within two years or until the amount has been collected.

The P1.96 billion from the third GRAM installment will be collected anywhere from 12 months to 64 months.

It is critical for the Napocor-SPUG to be able to recover its costs in a timely so that it will have sufficient funds to address its operational expenses, particularly the fuel cost and its maturing obligations. It should be recalled that Napocor itself is constrained to raise funds as it was no longer allowed to conduct its own fund-raising activities given the huge energy debts that have piled up over the past decade.

The Napocor-SPUG currently operates 232 generating units with a total generated capacity of about 175 megawatts. It serves 214 island and isolated grids providing electricity to 47 customers consisting of 39 electric cooperatives, seven local government units and one multipurpose cooperative.