Cost adjustments for utilities seen reverting to PPA scheme, ERC says
Monday, February 27, 2006
By MYRNA M. VELASCO
The Energy Regulatory Commission (ERC) has indicated that if the Generation Rate Adjustment Mechanism (GRAM) is nullified by the Supreme Court, the mode of recovery of power cost adjustments will revert back to the purchased power adjustment (PPA) scheme.
This was articulated by ERC Commissioner Rauf Tan in a public hearing called by the Joint Congressional Power Commission (JCPC) last Friday that aims to assess the impact of the court ruling on electricity prices and the overall viability of the power industry.
"Cost recovery will go back to PPA regime if GRAM is voided, and this shall stay until such time that PPA is rendered ineffective," the ERC official has noted.
The regulatory body also raised contention that GRAM recovery does not merit a regular rate application, thus, a gray area is raised on question of publicity broached by the high court in its ruling.
Meanwhile, the Manila Electric Company (Meralco) has estimated that its customers will have to pay back at least P0.90 per kilowatt hour (kWh) on a one-time billing or a total of P1.8 billion if the GRAM policy will be scrapped.
Given such anticipated adverse impact on the electricity consumers, the utility firm in a motion for reconsideration it filed with the high court, sought for the dismissal of the case lodged by interest group National Association of Electricity Consumers for Reforms (Nasecore) seeking to stop the enforcement of GRAM to Meralco, which also has a spiraling effect on the cost recovery application to all other distribution utilities and even the National Power Corporation.
Meralco is a co-respondent in the case, where the SC en banc likewise ruled to invalidate the Order of the ERC on the P0.1327 per kWh GRAM recovery of Meralco, costs that it already advanced to its power suppliers, like NPC and contracted independent power producers.
The estimated P1.8 billion payback to Meralco and has to be charged as increase in the customers’ billings was based on assumptions that the utility firm will have to revert back to the bundled regime of electricity rates prior to the GRAM; as the SC verdict also deemed the policy ineffective on grounds of technicality.
The high tribunal ruled that in view of the oversight on the part of the ERC to publish the GRAM implementing rules in the Official Gazette or in a newspaper of general circulation, the enforcement of such policy is deemed "ineffective" ab initio (from the beginning).
"The GRAM Implementing Rules must be declared ineffective as the same was never published or filed with the National Administrative Register," the SC stated.
The Court has laid down that a publication of implementing rules and regulations of policy issuances and their subsequent filing with the National Administrative Register is required as mandated under Administrative Code of 1987.
The ERC, established as a quasi-judicial body under the Electric Power Industry Reform Act, shall justify in its plea why its decision on GRAM cost recovery shall not be voided on account of the specified circumstance.
Legal experts in the power industry argued that if GRAM would be voided, this will merit a return to the regime of the purchased power adjustment (PPA) which posits automatic recovery of rate adjustments, because that was the established set-up of cost recovery before GRAM was enforced by the ERC.
posted by philpower @ 12:35 PM,
