Electricity rates seen to increase in 2013

Power consumers may have to brace for possible rate increases next year with the nearing approval of the petition of state-run Power Sector Assets and Liabilities Management Corp. (PSALM) to collect close to P140 billion worth of stranded debts and contract costs.

Francis Saturnino Juan, executive director of the Energy Regulatory Commission, has confirmed that the commission last week issued an order confirming that the case was ready for final deliberations after the completion of case hearings and other documentation.

“[This means that] any time after today, the case can be deliberated upon and resolved. We don’t have a definite timeline as to when this will happen. We are also cognizant of the fact that PSALM is urgently requesting for the resolution, but we are saddled with cases that are equally important,” Juan said.

Juan added that the ERC has yet to evaluate and deliberate the final amount to be collected from consumers and the length of the collection period.

Should PSALM’s application be approved, consumers can expect to pay another 36 centavos a kilowatt-hour over the next four years and a separate 3 centavos a kWh over a 15-year period to help pay the debts of another government firm, the cash-strapped National Power Corp. (Napocor).

The 36 centavos a kWh that PSALM wanted to pass on to consumers would cover the payment of stranded contract costs (through the universal charge for stranded contract costs or UC-SCC), while the 3 centavos a kWh would be used to settle stranded debts (through the universal charge for stranded debts or UC-SD). With the 39 centavos a kWh from the two charges, PSALM will be able to collect about 25 billion a year to help pay for its outstanding obligations.

PSALM president Emmanuel Ledesma Jr. earlier said that the government agency was hoping to start the collection of universal charges for stranded debts and contract costs from all grid-connected power consumers early next year amid rumors that the ERC would be releasing the decision by January.

PSALM, however, is hoping to collect the UC-SCC for a longer period of 15 years, instead than the current four years set by the ERC, to ease the burden on consumers.

Should the ERC allow PSALM to recover the UC SCC for 15 years, the additional charge would be equivalent to 6 centavos a kWh. This means that the total universal charges for both stranded contract costs and stranded debts will amount to 9 centavos a kWh over the next 15 years. At 9 centavos a kWh, PSALM will be able to collect an additional P5 billion from consumers yearly.

Ledesma earlier said that PSALM also wanted to extend its corporate life by another 10 years as this would further reduce the universal charge burden to about 6.5 centavos to 7 centavos a kWh over a longer period.

“Extending the corporate life of PSALM is not necessary but it would be nice because we’re trying to mitigate the impact to consumers—it will be for the benefit the consumer,” Ledesma had stressed.

PSALM has since been seeking to extend its corporate life to 2036, intended to mitigate the impact of the P140 billion in stranded costs on all power consumers.