2 measures proposed to ease impact of NPC stranded costs

The intent toward ending the monopoly of state-run National Power Corporation (NPC) is about to be accomplished, but deregulation cost impacts may still pinch Filipino consumers’ pockets primarily the estimated P471 billion stranded debts which will eventually be passed on as additional line item in electricity bills.

Proposals though are being put forward to the Power Sector Assets and Liabilities Management Corporation (PSALM) so this dilemma will not result as superfluous burden for the ratepayers.

By law, PSALM is the mandated successor-company of NPC which shall manage its assets and liabilities, including those needed to be settled post-privatization.

Philippine Independent Power Producers Association president Ernesto B. Pantangco recommended at least two measures which PSALM may consider in addressing the stranded costs dilemma.

Firstly, he noted that stranded costs can be alleviated through extending their repayments over longer period of time; and secondly, to allocate a portion of the reduction as the government’s share in funding such costs.

In the electricity bills, there are two line items in which stranded costs will be billed to end-users. One would be for stranded contract costs; and the other will be for NPC’s stranded debts.

Stranded costs would account for obligations (debts and contractual liabilities with independent power producers) that shall remain outstanding and set for eventual settlement or repayment beyond NPC’s privatization.

The Electric Power Industry Reform Act (EPIRA) allows pass-through of such costs to the end-consumers. This early though, the industry regulator is already advancing word that the pass on of such rate components must be done in such a way that it will not result in price shocks to the end-users.

Based on filings made by PSALM to the Energy Regulatory Commission, it proposed to recover some P470.865 billion worth of NPC stranded debts over 17 to 25 years at charges ranging from P0.2252 per kilowatt hour to P0.3049 per kWh.

The company also lodged a separate application for the recovery of some P22.256 billion worth of stranded contract costs, which may redound to as much as P0.5024 per kWh charge if recovery period will just be confined to one year.

The smoothing mechanisms proposed by PSALM would be to spread out the cost recovery duration to three years for a reduced charge of P0.1601 per kWh or over five years at P0.0.0920 per kWh.

The regulatory body has yet to rule on PSALM”s applications, although it already indicated that it will strictly scrutinize its basis of computations before promulgating any decision on the matter. –MYRNA M. VELASCO, Manila Bulletin