MANILA, Philippines—Power consumers should brace for higher electricity rates, starting March, as the Energy Regulatory Commission has allowed the state-run Power Sector Assets and Liabilities Management Corp. (PSALM) to collect P53.58 billion worth of so-called stranded contract costs.

This is equivalent to an increase of 19.38 centavos per kilowatt-hour, which will be collected under a new component in consumers’ electricity bills to be called the universal charge for stranded contract costs (UC-SCC), the ERC said in a statement.

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“All electricity consumers are liable to pay this charge to their respective distribution utilities or to the grid operator for the directly connected customers, which in turn shall remit all their collections to PSALM, as administrator of the UC fund,” the ERC said.

For the typical residential consumer with a monthly electricity consumption of 200 kWh, this will translate to an additional P38.76.

Stranded contract costs are the transition costs incurred when the government deregulated the power sector to create a more competitive environment and which the state generator, the National Power Corp. (Napocor), is allowed to recover. They refer to the difference between Napocor’s contractual payment obligations with independent power producers (IPPs) and the revenue earned from the sale of the contracted energy from these same IPPs.

ERC executive director Francis Saturnino Juan explained that the P53.58 billion represented accumulated stranded contract costs that were incurred by Napocor from 2007 to 2010.

PSALM, the agency that was created to manage the assets and liabilities of Napocor after the liberalization of the power sector, had originally sought to recover from consumers P74.3 billion worth of stranded contract costs, which would have caused power bills to shoot up by 36.66 centavos per kWh.

The ERC, however, rejected PSALM’s calculations, as it said PSALM had failed to take into account the additional revenues it stood to realize from Napocor’s eligible contracts with IPPS and pending applications under the generation rate adjustments and incremental currency exchange rate adjustment (GRAM and Icera) mechanisms.

The ERC also said it had excluded revenue deductions that PSALM had made, which effectively increased the stranded contract costs, through its implementation of supply arrangements and discount programs like the default wholesale supply (DWS), one-day power sales (ODPS) and prompt payment discount (PPD).

Originally posted at 07:01 pm | Tuesday, February 19, 2013

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