ERC drafts new cost recovery formula
Tuesday, September 12, 2006
By MYRNA M. VELASCO
After scrapping the automatic recovery scheme, which was initially imposed on Manila Electric Company (Meralco), the Energy Regulatory Commission (ERC) bared that it will draw up a new formula that will be in keeping with the Supreme Court (SC) ruling on cost recoveries.
A resolution set out by the regulatory body directed Meralco to stop collecting from its consumers adjustments in its generation charge authorized under an automatic mechanism.
The ERC referred to the Generation Rate Adjustment Mechanism (GRAM) in its ruling; but it was learned from the utility firm that the coverage was actually extended and technically proffered the scrapping also of the Automatic Generation Rate Adjustment.
The formula for automatic cost recoveries sidestepped prior hearings which lessens regulatory lag and facilitates the process of recovery of generation costs that had been paid in advance to its power generators by a distribution utility. The ERC, however, undertakes review and verification of the recovered costs.
It was gathered that the regulator has been preventing legal backlash if cost recoveries under AGRA would be continued so it opted to craft a new methodology to replace these schemes.
Once the revised scheme is in place, it was noted that this shall also apply to all distribution utilities, and not only Meralco.
Meralco was reportedly assured by the Commission that a new cost recovery policy for adjustments in fuel and purchased power tacked onto the generation charges in the bills will be in place very soon.
The utility firm sounded off that with the suspension of cost recoveries, the amount may pile up and the consumers may get shocked when they would experience bigger adjustments when these amounts would be recouped.
In a press statement, the ERC noted that "the recovery of said adjustments can be implemented only after the filing of an appropriate application."
This has been set, it noted, heeding Section 4 (e), Rule 3 of the Implementing Rules and Regulation (IRR) of the Electric Power Industry Reform Act (EPIRA) of 2001; which requires publication and public hearing for rate adjustments.
"The ERC hopes that a DU like MERALCO will be able to cope up with the effects of the SC ruling and that ERC will be likewise provided with enough resources to meet the demands of the said ruling," ERC chairman Rodolfo Albano has noted.
In its resolution, the ERC has likewise directed Meralco to submit a refund scheme for the GRAM collections made during the contested period of June to August 2004.
It was learned that the scheme sorted out would be for Meralco to initially shoulder the cost of refund and will just eventually recover these costs again from the consumers.
posted by philpower @ 2:47 PM,
